Homework Answers
Ans. 1) a. Figure A
As we can see that initially, Marcos likes both the goods (i.e. good X and good Y ) so the quantity of both the goods increases but after a certain point, he doesn't like good X. Therefore, the quantity of good X falls and quantity of good Y increases as he always likes good Y and indifference tends to be shaped like Figure A.
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Marcos always likes Y. At first, he likes X. However, each additional unit of X isn't...
Tom likes cookies (c) and milk (ml). He always takes one cup of cookies with two...
Tom likes cookies (c) and milk (ml). He always takes one cup of cookies with two cups of milk. Both cookies and milk cost $2 per cup. Tom has $24 to spend on these two goods. Consider a price drop in milk to $1 per cup. What kind of preferences does Tom have? Illustrate the shape of his indifference curves (cookies are measured on the y-axis). Derive his demand functions for cookies and milk. Find his optimal consumption bundle before...
3. Indifference curves and preferences Edison likes both chocolate and ice cream. Assume that the more...
3. Indifference curves and preferences Edison likes both chocolate and ice cream. Assume that the more is better" principle applies to Edison; that is, he would always prefer to consume more of either good, holding the consumption of the other good constant. The points on Figure 1 represent combinations of ice cream and chocolate that Edison might choose to consume. Figure 2 shows the same points as Figure 1, but it also shows some of Edison's indifference curves: 11, 12,...
3. Indifference curves and preferences Alex likes both soda and milk. Assume that the "more is...
3. Indifference curves and preferences Alex likes both soda and milk. Assume that the "more is better" principle applies to Alex; that is, he would always prefer to consume more of either good, holding the consumption of the other good constant. The points on Figure 1 represent combinations of milk and soda that Alex might choose to consume. Figure 2 shows the same points as Figure 1, but it also shows some of Alex's indifference curves: 11, 12, and 13...
5. Reagan dislikes X; each additional unit decreases her (total) utility by more than the previous...
5. Reagan dislikes X; each additional unit decreases her (total) utility by more than the previous unit. On the other hand, Reagan likes Y; each additional unit increases her (total) utility by less than the previous unit. Which of the following utility functions could represent her preferences? a, U =- Y2 Y2 x1/2
Mitch likes both juice and milk. Assume that the "more is better" principle applies to Mitch;...
Mitch likes both juice and milk. Assume that the "more is better" principle applies to Mitch; that is, he would always prefer to consume more of either good, holding the consumption of the other good constant. (Using the terminology of preferences, this means you assume that his preferences are monotonic.) The points on the following diagram represent combinations of milk and juice that Mitch might choose to consume JUICE (Cans per week MILK (Glasses per weekl Given only the information...
Draw indifference curves to represent the following types of consumer preferences (put Apples on the x-axis...
Draw indifference curves to represent the following types of consumer preferences (put Apples on the x-axis and Oranges on the y-axis) Make sure to include arrows to indicate direction of preference. (Hint: Start with a bundle (say 10 units of each), and think about other bundles that give the consumer the same utility.) a) I like apples, but dislike Oranges. b) I dislike Apples, and dislike Oranges. c) I neither like nor dislike Apples, but dislike Oranges. d) I like...
7. An individual's preferences are represented by the utility function Ua, y) 4xy x. Which of...
7. An individual's preferences are represented by the utility function Ua, y) 4xy x. Which of the following statements is false? a. The marginal utility of x increases as x increases, holding y constant. b. Preferences are monotonic in both goods. c. The indifference curves slope downward at a decreasing rate. d. The marginal rate of substitution ofx for y increases as y increases, holding x constarnt e. The consumer is willing to give up decreasing amounts of good y...
6. An individual is willing to forgo increasing amounts of good Y for each additional unit...
6. An individual is willing to forgo increasing amounts of good Y for each additional unit of good X. Which of the following utility functions is consistent with these preferences? a. U(X, Y) =X+y? b. U(X, Y) (X1/2Y1/2)2 c. U(X,Y) Y2 x2
8. An individual's preferences are represented by the utility function Ulx, y) . Which of the...
8. An individual's preferences are represented by the utility function Ulx, y) . Which of the following statements is true? a. The marginal utility of x decreases as x increases, holding y constant. b. The marginal rate of substitution of x for y increases as the consumer substitutes x for y (i.e. more x and less y) along an indifference curve. c. The consumer needs to be compensated with (i.e. gain) increasing amounts of good x in order to be...
Quantity of Y Quantity of Y Quantity of X Figure A Quantity of X Figure B...
Quantity of Y Quantity of Y Quantity of X Figure A Quantity of X Figure B Quantity of Y Quantity of Y Quantity of X Figure C Quantity of X Figure D 17) Consider the indifference maps shown above. If X and Y are perfect substitutes, your indifference curves between them would look like those in A) Figure A. B) Figure B. C) Figure C. D) Figure D. CDs (number per year) 5 10 15 20 25 DVDs (number per...
3. Indifference curves and preferences Edison likes both chocolate and ice cream. Assume that the more is better" principle applies to Edison; that is, he would always prefer to consume more of either good, holding the consumption of the other good constant. The points on Figure 1 represent combinations of ice cream and chocolate that Edison might choose to consume. Figure 2 shows the same points as Figure 1, but it also shows some of Edison's indifference curves: 11, 12,...
3. Indifference curves and preferences Alex likes both soda and milk. Assume that the "more is better" principle applies to Alex; that is, he would always prefer to consume more of either good, holding the consumption of the other good constant. The points on Figure 1 represent combinations of milk and soda that Alex might choose to consume. Figure 2 shows the same points as Figure 1, but it also shows some of Alex's indifference curves: 11, 12, and 13...
5. Reagan dislikes X; each additional unit decreases her (total) utility by more than the previous unit. On the other hand, Reagan likes Y; each additional unit increases her (total) utility by less than the previous unit. Which of the following utility functions could represent her preferences? a, U =- Y2 Y2 x1/2
Mitch likes both juice and milk. Assume that the "more is better" principle applies to Mitch; that is, he would always prefer to consume more of either good, holding the consumption of the other good constant. (Using the terminology of preferences, this means you assume that his preferences are monotonic.) The points on the following diagram represent combinations of milk and juice that Mitch might choose to consume JUICE (Cans per week MILK (Glasses per weekl Given only the information...
7. An individual's preferences are represented by the utility function Ua, y) 4xy x. Which of the following statements is false? a. The marginal utility of x increases as x increases, holding y constant. b. Preferences are monotonic in both goods. c. The indifference curves slope downward at a decreasing rate. d. The marginal rate of substitution ofx for y increases as y increases, holding x constarnt e. The consumer is willing to give up decreasing amounts of good y...
6. An individual is willing to forgo increasing amounts of good Y for each additional unit of good X. Which of the following utility functions is consistent with these preferences? a. U(X, Y) =X+y? b. U(X, Y) (X1/2Y1/2)2 c. U(X,Y) Y2 x2
8. An individual's preferences are represented by the utility function Ulx, y) . Which of the following statements is true? a. The marginal utility of x decreases as x increases, holding y constant. b. The marginal rate of substitution of x for y increases as the consumer substitutes x for y (i.e. more x and less y) along an indifference curve. c. The consumer needs to be compensated with (i.e. gain) increasing amounts of good x in order to be...
Quantity of Y Quantity of Y Quantity of X Figure A Quantity of X Figure B Quantity of Y Quantity of Y Quantity of X Figure C Quantity of X Figure D 17) Consider the indifference maps shown above. If X and Y are perfect substitutes, your indifference curves between them would look like those in A) Figure A. B) Figure B. C) Figure C. D) Figure D. CDs (number per year) 5 10 15 20 25 DVDs (number per...
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