6. Assume that you have two agents with the following utility functions: u1(x,y)-21n(x)+In(y) and uz(x,y)-In(x)+3 1n(y)....
Question 2 Carol has the following utility function: Uc = (xc)0.6 (4c)0.4 where xc and yc are the quantities of x and y consumed by Carol. Carol's endowments are Tc = 100 and Yc = 100. Assuming the prices of x and y are denoted Px and Py respectively, Carol's budget constraint is given by: 100 (Px + Py) = Px&c + PyYc. (a) State the Lagrangian for Carol's consumer choice problem. (i.e. the Lagrangian used to derive his demand...
4. Assume that the utility function of a given agent is given by: U(X,Y) = log X + Blog Y. And that this agent faces the following vector of prices: (10, 8) and that his income is 100. What should be the optimal consumption of X and Y for this specific agent? (assume perfect divisibility of goods)
Suppose you have the following utility function U(X.,Y)-min{2X,Y} Let's assume you have $80 to spend between goods X and Y and the prices are Px 2 and Py -4 Find the utility maximizing consumption level of X and Y. Please show all your work and provide explanations.
Suppose James derives utility from two goods {x,y}, characterised by the following utility function: $u(x, y) = 2sqrt{x} + y$: his wealth is w = 10 let py = 1: (a) What is his optimal basket if px = 0.50? What is her utility? (b) What is his optimal basket and utility if px = 0.20? (c) Find the substitution effect and the income effect associated with the price change. (d) What is the change in consumer surplus? Suppose Linda...
Question 6 6 In Problems 5 - 7, you are given the utility function u(x, y), income I and two sets of prices: initial prices px,py and final prices p,%-For each problem, you are to find: (a) the optimal choice at the initial prices (b) the optimal choice at the final prices (c) the change- optimal choice at final prices - optimal choice at initial prices (d) the income effect and the substitution effect 5) u(x, y)-min(x, 3y), 1-14, p.-1,...
A household's utility function is given by U(x, y, z) = 6 In x + 9 ln y + 15 In z, where x,y and z are the quantities of products X, Y and Z respectively, consumed by the household each month. The prices per unit for these three goods are px = $6, Py = $15 and pz = $24, respectively. The household's monthly budget for these goods is B = $4800. Question 11 2 pts This continues the...
Utility maximization with more than two goods Suppose that there four goods Q, R, X and Y , available in arbitrary non-negative quantities (so the the consumption set is R 4 +). A typical consumption bundle is therefore a vector (q, r, x, y), where q ≥ 0 is the quantity of good Q, r ≥ 0 is the quantity of good R, x ≥ 0 is the quantity of good X, and y ≥ 0 is the quantity of...
Suppose that a consumer’s utility function is U(x,y)=xy+10y. the marginal utilities for this utility function are MUx=y and MUy=x+10. The price of x is Px and the price of y is Py, with both prices positive. The consumer has income I. (this problem shows that an optimal consumption choice need not be interior, and may be at a corner point.) Assume first that we are at an interior optimum. Show that the demand schedule for x can be written as...
Suppose an individual’s utility function for two goods X and Y is givenby U(X,Y) = X^(3/4)Y^(1/4) Denote the price of good X by Px, price of good Y by Py and the income of the consumer by I. a) (2 points) Write down the budget constraint for the individual. b) (4 points) Derive the marginal utilities of X and Y. c) (3 points) Derive the expression for the marginal rate of substitution of X for Y. Write down the tangency...
Assume that Sam has following utility function: U(x,y) = 2√x+y. Assume px = 1/5, py = 1 and her income I = 10. (e) Draw an optimal bundle which is the result of utility maximization under given budget set. (Hint: Assume interior solution). Define corresponding expenditure minimization problem (note the elements for expenditure minimization problem are (i) objective function, (ii) constraint, (iii) what to choose). (f)Describeaboutwhatthedualityproblemis. Definemarshalliandemandfuction andhicksiandemandfunction. (Hint: identifytheinputfactorsofthesefunctions.) (g) Consider a price increase for the good x from...