Homework Answers
Cindy's optimal consumption bundle is D. And Prince optimal consumption bundle is C.
Reason. The green line shows budget line. No one can spend beyond this. So both are forced to consume within this. Usually the optimal bundle is the point when budget line meets an indifference curve. Since in case of Cindy by moving inwards her satisfaction is increasing and since she D is cheaper for her to purchase than C. So she must opt for D.
In case of Prince, his satisfaction increases by moving in outward direction . So his satisfaction at point C is greater than D. So he prefers to buy C - consumption bundle.
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QUESTION 2 Cindy and Prince have the following preferences for goods 1 and 2, represented by...
3. Michael has preferences over two goods, z1 and r2, represented by the utility function (a)...
3. Michael has preferences over two goods, z1 and r2, represented by the utility function (a) Find the MRS12 associated with this utility function. (b) Use the MRS12, the price ratio, and the budget constraint to find Michael's optimal bundle when m 3000, P50, and 10. for r2. (You will need to calculate the utility at the optimal point in order to do this.) a single graph. Be sure to label the curves, the optimal point, and the axes. (c)...
Long Question #2 Consider preferences over food and housing represented by the utility function U F2/3H1/3...
Long Question #2 Consider preferences over food and housing represented by the utility function U F2/3H1/3 A. Let Income 1200, PE 2 and PH6. Find the quantity demanded of housing and food. Graph the budget constraint and the optimal bundle that you found. Make sure to include an indifference curve. Let the price of food increase to 4. Add the new budget constraint, find the new optimal bundle and add it to your graph. B.
1. Sally has preferences represented by the utility function UC, M) = 3 + 61rC M, where C is coffee and M is meals....
1. Sally has preferences represented by the utility function UC, M) = 3 + 61rC M, where C is coffee and M is meals. Her income is S100, and she pays $2 per coffee and S10 per meal a. Distinguish (the concepts of) diminishing marginal rate of substitution from diminishing marginal uty Your answer does not have to be specific to Sally's preferences. (4 points) Use the Lagrangian method to derive Sally's utility maximizing bundle given her budget constraint. Circle...
QUESTION 4 Reshad's preferences over goods 1 and 2 are given by the following utility function:...
QUESTION 4 Reshad's preferences over goods 1 and 2 are given by the following utility function: U(q1, q2)q2Select all that applies: O a His preferences satisfy "more is better O b. His preferences fail the transitivity assumption C. His indifference curves are downward sloping His preferences are convex D e. He dislikes good 1 Marginal rate of substitution for his preferences is given by MRS12
1. True or False, and explain briefly. 1) The assumption that more is better implies that...
1. True or False, and explain briefly. 1) The assumption that more is better implies that the indifference curves are upward sloping 2) Convexity of indifference curves implies that consumers are willing to give up more to get an extra the more they have 3) Consider the following three bundles. Bundle Good Goody If Bundles A and B are on the same indifference curve, preferences satisfy all the usual assumptions introduced in the lecture, Bundle Cis preferred to Bundle A...
Sally consumes two goods, X and Y. Her preferences over consumption bundles are repre- sented by the utility function r...
Sally consumes two goods, X and Y. Her preferences over consumption bundles are repre- sented by the utility function r, y)- .5,2 where denotes the quantity of good X and y denotes the quantity of good Y. The current market price for X is px 10 while the market price for Y is Pr = $5. Sally's current income is $500. (a) Write the expression for Sally's budget constraint. (1 point) (b) Find the optimal consumption bundle that Sally will...
8. Fats Dominio's preferences over food expenditures, (f) and expenditures on other goods (9) can be...
8. Fats Dominio's preferences over food expenditures, (f) and expenditures on other goods (9) can be represented by the utility function: with Slim Picken's preferences can be represented by the utility function: with Each has income of only $100.00 per month: the competition from the pop idols and hip hop has really hurt sales. Prices are PP9 1. a) What are the optimal expenditures on food and other goods for both Fats and Slim? b) On ONE diagram draw the...
Concept: Optimal Consumption Bundle E Question Help The graph to the night illustrates Isabel's preferences for...
Concept: Optimal Consumption Bundle E Question Help The graph to the night illustrates Isabel's preferences for milk and ice cream using indifference curves ( lly, ly, and I) and her budget constraint Use the point drawing tool to indicate Isabel's utility maximizing consumption bundle Label this point "Optimal . Carefully follow the instructions above, and only draw the required objects Budget Constraint Milk (gallons per week) 0 1 2 3 5 6 7 8 9 Ice Cream (gallons per week)...
Question 2. Consider the following 8 bundles of goods x and y: A = (8,4) B...
Question 2. Consider the following 8 bundles of goods x and y: A = (8,4) B = (5,6) C = (5,9) D = (10,3) E =(1,4) F =(6,5) G=(2,8) H =(7,8) (a) Come up with an example of a utility function that will produce the following order of preference for the bundles, where H is most preferred, A and G are equally preferred, and E is least preferred. H , C , B , F , A = G ,...
QUESTION 5 Reshad's preferences over goods 1 and 2 are given by the following utility function:...
QUESTION 5 Reshad's preferences over goods 1 and 2 are given by the following utility function: Uq1. 42) Reshad's income is $60 and the prices are given by p1-3 and p2-2. Select all that applies: 1+q1 42 41 a. Marginal rate of substitution for his preferences is given by MRS12 When he consumes zero amount of good 1, his MRS is equal to 1. c. It is optimal for him to consume 20 units of good 1. @dㆎt is optimal...
3. Michael has preferences over two goods, z1 and r2, represented by the utility function (a) Find the MRS12 associated with this utility function. (b) Use the MRS12, the price ratio, and the budget constraint to find Michael's optimal bundle when m 3000, P50, and 10. for r2. (You will need to calculate the utility at the optimal point in order to do this.) a single graph. Be sure to label the curves, the optimal point, and the axes. (c)...
Long Question #2 Consider preferences over food and housing represented by the utility function U F2/3H1/3 A. Let Income 1200, PE 2 and PH6. Find the quantity demanded of housing and food. Graph the budget constraint and the optimal bundle that you found. Make sure to include an indifference curve. Let the price of food increase to 4. Add the new budget constraint, find the new optimal bundle and add it to your graph. B.
1. Sally has preferences represented by the utility function UC, M) = 3 + 61rC M, where C is coffee and M is meals. Her income is S100, and she pays $2 per coffee and S10 per meal a. Distinguish (the concepts of) diminishing marginal rate of substitution from diminishing marginal uty Your answer does not have to be specific to Sally's preferences. (4 points) Use the Lagrangian method to derive Sally's utility maximizing bundle given her budget constraint. Circle...
QUESTION 4 Reshad's preferences over goods 1 and 2 are given by the following utility function: U(q1, q2)q2Select all that applies: O a His preferences satisfy "more is better O b. His preferences fail the transitivity assumption C. His indifference curves are downward sloping His preferences are convex D e. He dislikes good 1 Marginal rate of substitution for his preferences is given by MRS12
1. True or False, and explain briefly. 1) The assumption that more is better implies that the indifference curves are upward sloping 2) Convexity of indifference curves implies that consumers are willing to give up more to get an extra the more they have 3) Consider the following three bundles. Bundle Good Goody If Bundles A and B are on the same indifference curve, preferences satisfy all the usual assumptions introduced in the lecture, Bundle Cis preferred to Bundle A...
Sally consumes two goods, X and Y. Her preferences over consumption bundles are repre- sented by the utility function r, y)- .5,2 where denotes the quantity of good X and y denotes the quantity of good Y. The current market price for X is px 10 while the market price for Y is Pr = $5. Sally's current income is $500. (a) Write the expression for Sally's budget constraint. (1 point) (b) Find the optimal consumption bundle that Sally will...
8. Fats Dominio's preferences over food expenditures, (f) and expenditures on other goods (9) can be represented by the utility function: with Slim Picken's preferences can be represented by the utility function: with Each has income of only $100.00 per month: the competition from the pop idols and hip hop has really hurt sales. Prices are PP9 1. a) What are the optimal expenditures on food and other goods for both Fats and Slim? b) On ONE diagram draw the...
Concept: Optimal Consumption Bundle E Question Help The graph to the night illustrates Isabel's preferences for milk and ice cream using indifference curves ( lly, ly, and I) and her budget constraint Use the point drawing tool to indicate Isabel's utility maximizing consumption bundle Label this point "Optimal . Carefully follow the instructions above, and only draw the required objects Budget Constraint Milk (gallons per week) 0 1 2 3 5 6 7 8 9 Ice Cream (gallons per week)...
QUESTION 5 Reshad's preferences over goods 1 and 2 are given by the following utility function: Uq1. 42) Reshad's income is $60 and the prices are given by p1-3 and p2-2. Select all that applies: 1+q1 42 41 a. Marginal rate of substitution for his preferences is given by MRS12 When he consumes zero amount of good 1, his MRS is equal to 1. c. It is optimal for him to consume 20 units of good 1. @dㆎt is optimal...
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