Homework Answers
Ans is B
Above utility function is such that two goods are always consumed in fixed proportions irrespective of their prices and income. It means there will be zero substitution effect and total effect is equal to total income effect.
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3) Jim likes to consume ice-cream and strawberries according to the perfect complements utility function u(21,22)...
Yam has the following utility function for Apples (X1) and Ice Cream (X2) U(X1,X2) = Min{3X1,X2}....
Yam has the following utility function for Apples (X1) and Ice Cream (X2) U(X1,X2) = Min{3X1,X2}. Draw Yam’s indifference curves when she consumes 1 and 2 apples. Derive Yam’s demand functions for Apples and Ice Cream. Suppose Yam has an income of M = $120 and the prices of Apples and Ice Cream are p1 =$1, p2 =$1. What is Yam’s optimal consumption of Apples and Ice Cream? Suppose a quantity tax of $1 is imposed on Apples. Separate out the...
Exercise 3 For Sandra, coffee and sugar are perfect complements: she wants to consume exactly 2 g...
Exercise 3 For Sandra, coffee and sugar are perfect complements: she wants to consume exactly 2 g of sugar for each cup of coffee. She has S6 to spend on sugar and coffee. One gram of sugar costs 5 cents and one cup of coffee costs 20 cents. Draw a diagram, with sugar on the horizontal axis and cup of coffee on the vertical axis, to answer the following questions. 1. Which bundle will Sandra consume (represented by point A)?...
3. Suppose an individual has perfect-complements preferences that can be represented by the utility function U(x,y)=...
3. Suppose an individual has perfect-complements preferences that can be represented by the utility function U(x,y)= min[3x,2y]. Furthermore, suppose that she faces a standard linear budget constraint, with income denoted by m and prices denoted by px and p,, respectively. a) Derive the demand functions for x and y. b) How does demand for the two goods depend on the prices, p, and p, ? Explain.
Exercise 3 For Sandra, coffee and sugar are perfect complements: she wants to consume exactly 2...
Exercise 3 For Sandra, coffee and sugar are perfect complements: she wants to consume exactly 2 g of sugar for each cup of coffee. She has S6 to spend on sugar and coffee. One gram of sugar costs 5 cents and one cup of coffee costs 20 cents. Draw a diagram, with sugar on the horizontal axis and cup of coffee on the vertical axis, to answer the following questions. 1. Which bundle will Sandra consume (represented by point A)?...
Josh gets utility (satisfaction) from two goods, A and B, according to the utility function U(A,B)...
Josh gets utility (satisfaction) from two goods, A and B, according to the utility function U(A,B) = 5A1/4B3/4. While Luke would like to consume as much as possible he is limited by his income. a. Maximize Josh’s utility subject to the budget constraint using the Lagrangean method. b. Suppose PA increase. Show graphically the income, substitution effect and total effect and explain. c. Suppose PA increase. Show the graph for CV and EV and explain.
The utility function is u = x1½ + x2, and the budget constraint is m =...
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...
2. Consider the Cobb-Douglas utility function u(x,y) = x2y2. Let the budget 1, where pr, py...
2. Consider the Cobb-Douglas utility function u(x,y) = x2y2. Let the budget 1, where pr, py are the prices and I denotes the constraint be prx + pyy income. (a) Write the Lagrangian for this utility maximization problem. (b) Solve the first-order conditions to find the demand functions for both good a and good y. [Hint: Your results should only depend on the pa- rameters pa, Py, I.] (c) In the optimal consumption bundle, how much money is spend on...
answer e and f only please Exercise 3. Slutsky (Quasilinear) The utility function is u =...
answer e and f only please
Exercise 3. Slutsky (Quasilinear) The utility function is u = x + xy, and the budget constraint is m=P,X, + P2XZ. a) Derive the optimal demand curve for good 1, x,(PP2), and good 2, x2(m, PP.). b) Looking at the cross price effects (@x_/ôp, and Ox_/ôp.) are goods x, and X, substitutes or complements? Looking at income effects (@x,lôm and Ox_lām) are goods x, and X, inferior, normal or neither? c) Assume m=100, =0.5...
Happy Goluki likes tea (good 1) and cookies (good 2) Her preferences are represented by the...
Happy Goluki likes tea (good 1) and cookies (good 2) Her preferences are represented by the utility function U(q1,q2) (q1)05(q2)0.5, where q1 is the number of cups of tea and q2 is the number of cookies Goluki is given I-$180 that she is allowed to spend as she wishes on tea and cookies. a) Calculate Goluki's optimal bundle if the price of tea is p1=$1 and the price of cookies s p2 $2. Call this bundle A and show it...
1. Consumer’s utility function is: U (X,Y) = 10X + Y. Consumer’s income M is 40...
1. Consumer’s utility function is: U (X,Y) = 10X + Y. Consumer’s income M is 40 euros, the price per unit of good X (i.e. Px ) is 5 euros and the price per unit of good Y (i.e. Py) is 1 euro. a) What is the marginal utility of good X (MUx) for the consumer? ( Answer: MUx = 10) b) What is the marginal utility of good Y (MUy) for the consumer? ( Answer: MUy = 1) c)...
Exercise 3 For Sandra, coffee and sugar are perfect complements: she wants to consume exactly 2 g of sugar for each cup of coffee. She has S6 to spend on sugar and coffee. One gram of sugar costs 5 cents and one cup of coffee costs 20 cents. Draw a diagram, with sugar on the horizontal axis and cup of coffee on the vertical axis, to answer the following questions. 1. Which bundle will Sandra consume (represented by point A)?...
3. Suppose an individual has perfect-complements preferences that can be represented by the utility function U(x,y)= min[3x,2y]. Furthermore, suppose that she faces a standard linear budget constraint, with income denoted by m and prices denoted by px and p,, respectively. a) Derive the demand functions for x and y. b) How does demand for the two goods depend on the prices, p, and p, ? Explain.
Exercise 3 For Sandra, coffee and sugar are perfect complements: she wants to consume exactly 2 g of sugar for each cup of coffee. She has S6 to spend on sugar and coffee. One gram of sugar costs 5 cents and one cup of coffee costs 20 cents. Draw a diagram, with sugar on the horizontal axis and cup of coffee on the vertical axis, to answer the following questions. 1. Which bundle will Sandra consume (represented by point A)?...
2. Consider the Cobb-Douglas utility function u(x,y) = x2y2. Let the budget 1, where pr, py are the prices and I denotes the constraint be prx + pyy income. (a) Write the Lagrangian for this utility maximization problem. (b) Solve the first-order conditions to find the demand functions for both good a and good y. [Hint: Your results should only depend on the pa- rameters pa, Py, I.] (c) In the optimal consumption bundle, how much money is spend on...
answer e and f only please
Exercise 3. Slutsky (Quasilinear) The utility function is u = x + xy, and the budget constraint is m=P,X, + P2XZ. a) Derive the optimal demand curve for good 1, x,(PP2), and good 2, x2(m, PP.). b) Looking at the cross price effects (@x_/ôp, and Ox_/ôp.) are goods x, and X, substitutes or complements? Looking at income effects (@x,lôm and Ox_lām) are goods x, and X, inferior, normal or neither? c) Assume m=100, =0.5...
Happy Goluki likes tea (good 1) and cookies (good 2) Her preferences are represented by the utility function U(q1,q2) (q1)05(q2)0.5, where q1 is the number of cups of tea and q2 is the number of cookies Goluki is given I-$180 that she is allowed to spend as she wishes on tea and cookies. a) Calculate Goluki's optimal bundle if the price of tea is p1=$1 and the price of cookies s p2 $2. Call this bundle A and show it...
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