U = 3x10.5 + 10x2
P1 = $3, P2 = $10, and m (income) = $100
Subject to the budget constraint, what is the utility maximizing quantities of x1 and x2?
The utility function is u = 3x1 + x2, and the budget constraint is m = p1x1 + p2x2. a) What are the demand functions x1(m,p1,p2) and x1(m,p1,p2)? For m=100, p1=4 and p2=1, what are the consumption amounts x1 and x2? b) Assume only p1 changes to p1’=2, define the new consumption values as x1M and x2M. c) Define as uH the utility amount you get from consumption bundle in part a. Find the consumption bundle (x1H,x2H) that gives you...
The utility function of the consumer is u(x1,x2) = (10x1 + x2). a) Plot all the consumption bundles that gives the consumer utility 100. (3 points) b) Plot all the consumption bundles that gives the consumer utility 144. (3 points) c) Plot the budget constraint when p. = 10,P2 = 10 and m = 100 (3 points) d) Plot the budget constraint when P1 = 20, P2 = 5 and m = 60 (3 points) e) What is the optimal...
The utility function is u = x1½ + x2, and the budget constraint is m = p1x1 + p2x2. Derive the optimal demand curve for good 1, x1(p1, p2), and good 2, x2(m, p1, p2). Looking at the cross price effects (∂x1/∂p2 and ∂x2/∂p1) are goods x1 and x2 substitutes or complements? Looking at income effects (∂x1/∂m and ∂x2/∂m) are goods x1 and x2 inferior, normal or neither? Assume m=100, p1=0.5 and p2=1. Using the demand function you derived in...
Luke's choice behavior can be represented by the utility function u(x1,x2)= x1 + x2.The prices of x1 and x2 are denoted as p1 and p2, and his income is m. 1. Draw at least three indifference curves and find its slope (i.e. MRS). Is the MRS changing depending on the points of (x1, x2) at which it is evaluated, or constant? 2. Draw a budget constraint assuming that p1 < P2. Find the optimal bundle (x1*,x2*) as a function of income and prices. 3....
Jay’s Utility function is given by U(x,z) = 3x10.2 x20.8 and P1=$2 and P2=$4 and his budget is $200. Write out the Lagrange but don’t solve it, Find the utility maximizing values of x1 and x2
Q6 Deriving Demand Function Derive demand functions x1(P1, P2, m) and x2(P1, P2, m) for the consumer with the utility function U(x1, x2) = xi x2
A consumer has income M, and faces prices (for goods 1 and 2) p1 and p2. For each of the following utility functions, graphically show the following: (i) the Slutsky substitution and income e⁄ects when p1 decreases. (ii) the Hicks substitution and income e⁄ects when p1 decreases. (iii) the Marshallian and Hicksian demand curves for good 1: (a) perfect complements: U(x1 , x2) = min {4x1, 5x2} (b) quasi-linear: U(x1 , x2) = x^2/3 1 + x2
Suppose an individual’s utility function is u=x11/2, x21/2. Let p1=4, p2=5, and income equal $200. With a general equation and general prices, derive the equal marginal principle. Graphically illustrate equilibrium and disequilibrium conditions and how consumers can reallocate their consumption to maximize utility. What is the optimal amount of x1 consumed? What is the optimal amount of x2 consumed? What is the marginal rate of substitution at the optimal amounts of x1 and x2? As functions of p1, p2, and...
U = 4x11/2 + 2x2. p1 = 12 and p2 = 8. Income (m) is 173.16. The utility optimizing quantity of x1 is
1. Suppose U(X1, X2) = 2lnx, + 3lnx, and P, = 4, P2 = 1, and m = 20. (15pts) a. Solve for the Utility maximizing amounts of x, and X2. b. Is this an interior or corner solution? c. Is the budget exhausted here? Yes/no d. Assume that the above prices and income have all doubled. How does this change your solution in a? e. Set up the Lagrangian for this problem (but do not solve it) 2. Suppose...