Question

I need help on number 6 and 7

Utility Surface: TU TUX + TU.Y 6.5 13.5 18.5 13 18 21 Y 2 Y_1 Y 0 10 15 18 12 15 15.5 1. Draw two indifference curves and identify the respective levels of utlity. 2. Arrive at the marginal utility structure of good X and good Y (use table below) NU.Y Units of 2 IS-12 6-5 MU.Y 5.5-45 3. Identify consumer equilibrium in general algebraically and@ in a diagram 4. F ndong nal consumer equilibnum when Mo: 2S: p|-1$ Pr:# ii. Identify the maximum udry (Uo)and the utility : maximizing commodity bundle (E°) 5. Find new consumer equilibrium when M 3s:Py . Identify the amumiy (UM)and the utility maximizing commodity bundle (EM) 6. Draw two graphs that appeat one on top of the other. Let the top graph show the consumer equilibria for the original case (question 4) and the new case (question 4). Let the bottom graph show the effect of income change on quantity demanded. 7. Arive at the income elasticity of demand for the good and identify the type of good. 25 j. Identfy the maxmu y(P)and the stlity 1 5 8. Find new consumer equalibrium when M 3 x 9. Draw two graphs that appear one on top of the other. Let the top graph show the consumer equilibria for the original case (question 10. Armive at the own-price elasticity of demand for the good and identify the type of good maximizing commodity bundle (EP) 4) and the new case (question 8). Let the bottom graph show the effect of own prce change on quantity demanded. Let the Cobb Douglas Utility Function be given by 11. Arrive at the marginal rate of substitution. Show your work 12. Solve fot the ong nal money income (question 4) when Mo2N p #1$ : h" зі Identify the maximum utility (U0 and the PIdentify the maximum utiliry (U)and the utility maximizing commodity bundle (E°) 13. Solve for the original moncy income (question 8) when M 2 3 x utlity maximizing commodity bundle (E°).

Answer 1

• With an increase in income ,the consumers purchasing power increases because he is in now a position to buy more goods.Consequently the consumers demand increases. Increase in income have a positive effect in the demand for goods.so the graph is that of positive sloping to the income and demand.
• Income elasticity of demand refers to the sensitivity of the quantity demanded for a certain good to a change in the real income of consumers who buy the good,keeping all other thinks constant.The formula for calculating the income elasticity of demand is the percentage change in the quantity demanded divided by the percentage change in the income.With income elasticity of demand,you can tell if a particular good represents necessary or luxury.Examples for necessary goods include tobacco products,water, etc.inferior good have a negative income elasticity of demand.As consumers income raises they buy fewer inferior goods.