Homework Answers
ANSWER: The consumer can be just as well off facing a quantity tax as an income tax there are kinked preferences, such as perfect complements (those goods which needs to be used together to satisfy a want), where the price change doesn't induce any change in demand or does not equate to a change in demand.
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2. For what kind of preferences (or utility) will the consumer be just as well-off facing...
2. (25%) Consider a consumer with preferences represented by the utility function: u(x1, x2) = min...
2. (25%) Consider a consumer with preferences represented by the utility function: u(x1, x2) = min {axı, bx2} If the income of the consumer is w > 0 and the prices are p1 > 0 and P2 > 0. (a) Derive the Marshallian demands. Be sure to show all your work. (b) Derive the indirect utility function. (c) Does the utility function: û(x1, x2) = axı + bx2 represent the same preferences?
Question 2 Question 2 (15 pts) A consumer has preferences represented by the utility function u(x,y)...
Question 2
Question 2 (15 pts) A consumer has preferences represented by the utility function u(x,y) -xlyi. (This means that a. What is the marginal rate of substitution? b. Suppose that the price of good x is 2, and the price of good y is 1. The consumer's income wWhat is the optimal quantity is 20. What is the optimal quantity of x and y the consumer will choose? c. Suppose the price of good x decreases to 1. The...
(20 points) Suppose the government wishes to tax a utility maximizing consumer to obtain a certain...
(20 points) Suppose the government wishes to tax a utility maximizing consumer to obtain a certain amount of tax revenue. A utility maximizing consumer has utility function ?(?, ?) = √? + ?. The price of ? is $1, the price of ? is $4 and the consumer’s income is $120. (a) Suppose the government imposes sales tax ? = 1 on good ? per unit. What is the optimal consumption for good ? and good ? for the consumer...
Suppose the government wishes to tax a utility maximizing consumer to obtain a certain amount of...
Suppose the government wishes to tax a utility maximizing consumer to obtain a certain amount of tax revenue. A utility maximizing consumer has utility function u(x,y)= square root(x+y). The price of x is $1, the price of y is $4 and the consumers income is $120. a) Suppose the government imposes sales tax t=1 on good x per unit. What is the optimal consumption for good x and good y for the consumer under the sales tax? What is the...
Consider a consumer in a two good economy whose preferences are rep resented by the following utility function U(x...
Consider a consumer in a two good economy whose preferences are rep resented by the following utility function U(x, y) = Vo+y d) Find her expenditure function, E(pr. Py, U). e) Solve her utility maximization problem for when pz = 1TL, Py = 4TL. and, I = 16TL. f) Solve her expenditure minimization problem for when pr = 1TL, Py = 4TL, and, U = 2. g How much do we have to compensate her (in terms of money) to...
Question 2 (15 pts) A consumer has preferences represented by the utility function ufa,y)ty. (This means...
Question 2 (15 pts) A consumer has preferences represented by the utility function ufa,y)ty. (This means that Muy and Muy ly 1) a. What is the marginal rate of substitution? b. Suppose that the price of good x is 2, and the price of good y is 1. The consumer's income is 20. What is the optimal quantity of x and y the consumer will choose? c. Suppose the price of good x decreases to 1. The price of good...
A consumer has preferences represented by the utility function u(x, y) -xlyi. (This means that a....
A consumer has preferences represented by the utility function u(x, y) -xlyi. (This means that a. What is the marginal rate of substitution? b. Suppose that the price of good x is 2, and the price of good y is 1. The consumer's income is 20. What is the optimal quantity of x and y the consumer will choose? c. Suppose the price of good x decreases to 1. The price of good y and the consumer's income are unchanged....
A consumer has preferences represented by the utility function: u(21,12)=x2? Market prices are p1 = 2...
A consumer has preferences represented by the utility function: u(21,12)=x2? Market prices are p1 = 2 and P2 = 5. The consumer has an income m = 13. Find an expression for the consumer's demand for good 1,21 (P1). 39p1
1 pts Question 2 A consumer has preferences represented by the utility function: u(x1, x2)= x...
1 pts Question 2 A consumer has preferences represented by the utility function: u(x1, x2)= x x Market prices are pi = 3 and P2 = 4. The consumer has an income m 30. Find an expression for the consumer's Engel curve for good 1. x1(m). ооо D Question 3 1 pts
Suppose a consumer’s preferences are represented by the utility function U(X,Y) = X2*Y. Therefore, MUx =...
Suppose a consumer’s preferences are represented by the utility function U(X,Y) = X2*Y. Therefore, MUx = 2XY • MUy = X2 Also, suppose the consumer has $32 to spend (M = $32), PY = 1, and that they spend all of their money on goods X and Y. Also, assume the consumer maximizes their utility subject to their budget constraint. Complete the following table: Px Quantity Demanded of X $1 $2 $3
2. (25%) Consider a consumer with preferences represented by the utility function: u(x1, x2) = min {axı, bx2} If the income of the consumer is w > 0 and the prices are p1 > 0 and P2 > 0. (a) Derive the Marshallian demands. Be sure to show all your work. (b) Derive the indirect utility function. (c) Does the utility function: û(x1, x2) = axı + bx2 represent the same preferences?
Question 2
Question 2 (15 pts) A consumer has preferences represented by the utility function u(x,y) -xlyi. (This means that a. What is the marginal rate of substitution? b. Suppose that the price of good x is 2, and the price of good y is 1. The consumer's income wWhat is the optimal quantity is 20. What is the optimal quantity of x and y the consumer will choose? c. Suppose the price of good x decreases to 1. The...
Consider a consumer in a two good economy whose preferences are rep resented by the following utility function U(x, y) = Vo+y d) Find her expenditure function, E(pr. Py, U). e) Solve her utility maximization problem for when pz = 1TL, Py = 4TL. and, I = 16TL. f) Solve her expenditure minimization problem for when pr = 1TL, Py = 4TL, and, U = 2. g How much do we have to compensate her (in terms of money) to...
Question 2 (15 pts) A consumer has preferences represented by the utility function ufa,y)ty. (This means that Muy and Muy ly 1) a. What is the marginal rate of substitution? b. Suppose that the price of good x is 2, and the price of good y is 1. The consumer's income is 20. What is the optimal quantity of x and y the consumer will choose? c. Suppose the price of good x decreases to 1. The price of good...
A consumer has preferences represented by the utility function u(x, y) -xlyi. (This means that a. What is the marginal rate of substitution? b. Suppose that the price of good x is 2, and the price of good y is 1. The consumer's income is 20. What is the optimal quantity of x and y the consumer will choose? c. Suppose the price of good x decreases to 1. The price of good y and the consumer's income are unchanged....
A consumer has preferences represented by the utility function: u(21,12)=x2? Market prices are p1 = 2 and P2 = 5. The consumer has an income m = 13. Find an expression for the consumer's demand for good 1,21 (P1). 39p1
1 pts Question 2 A consumer has preferences represented by the utility function: u(x1, x2)= x x Market prices are pi = 3 and P2 = 4. The consumer has an income m 30. Find an expression for the consumer's Engel curve for good 1. x1(m). ооо D Question 3 1 pts
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