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l. (a) "Utility maximization is achieved when the budget is allocated so that the marginal utility...
l. A consumer has €100 of income to allocate between chocolate and soda. Chocolate costs per...
l. A consumer has €100 of income to allocate between chocolate and soda. Chocolate costs per unit. (a) Suppose when soda costs 4 per unit, the consumer chooses 20 sodas. Draw the budget constraint and indifference curve to represent this budget and choice. (You can assume that the indifferences curves are regular, ie convex to the origin.) Now the company introduces a deal whereby the price falls to є3.00 if the consumer buys more than 20 sodas. So if the...
Consider a consumer with a utility function u(x1, x2) = min{21, 222}. Suppose the prices of...
Consider a consumer with a utility function u(x1, x2) = min{21, 222}. Suppose the prices of good 1 and good 2 are p1 = P2 = 4. The consumer's income is m = 120. (a) Find the consumer's preferred bundle. (b) Draw the consumer's budget line. (c) On the same graph, indicate the consumer's preferred bundle and draw the indifference curve through it. (d) Now suppose that the consumer gets a discount on good 1: each unit beyond the 4th...
1. SHORT ANSWER QUESTIONS 1. Explain why utility maximization requires that a consumer's budget is allocated...
1. SHORT ANSWER QUESTIONS 1. Explain why utility maximization requires that a consumer's budget is allocated so that the marginal utility per dollar of expenditure is the same for each good. 2. Theresa likes to talk on the telephone. We can represent her preferences with the utility function U(B,J)12B 24J, where B and J are minutes of conversation per month with Bill and Jackie respectivcly. What is the formula for her indiffcrencc curve to get U units of utility (that...
1. Bobby is a college student who has €500 of income to spend each semester on...
1. Bobby is a college student who has €500 of income to spend each semester on books and pizzas. The price of a pizza is €10 and the price of a book is є50. Suppose he consumes 20 pizzas. (a) Assuming that Bobby wants to maximie utility, draw Bobby's budget constraint and indifference curve. (b) Now, suppose Bobby's parents buy him a €300 gift certificate each semester that can only be used to buy You can assume that his indifference...
4. Indifference curves and utility maximization Teresa is in a band and likes to advertise upcomi...
4. Indifference curves and utility maximization Teresa is in a band and likes to advertise upcoming shows using flyers she posts around the city. Making one black-and-white flyer costs $0.05, and making a flyer in color costs $0.20. Teresa budgets $40.00 for making flyers each month. The following graph shows three of Teresa's indifference curves for the number of black-and-white and color flyers that she makes. Use the green line (triangle symbol) to plot Teresa's budget constraint. Then, place the...
Suppose that there two goods X and Y, available in arbitrary non- negative quantities (so the...
Suppose that there two goods X and Y, available in arbitrary non- negative quantities (so the the consumption set is R2). The consumer has preferences over consumption bundles that are strongly monotone, strictly convex, and represented by the following (differentiable) utility function: u(x, y)-y+2aVT, where z is the quantity of good X, and y is the quantity of good Y, and a 20 is a utility parameter The consumer has strictly positive wealth w > 0. The price of good...
(10 Question 1: marks) Given is the Total Utility Function along with Budget Constraint: Utility Function:...
(10 Question 1: marks) Given is the Total Utility Function along with Budget Constraint: Utility Function: U (X, Y) = X°.270.3 Budget Constraint: I = XP, + YP, a. What is the consumer's marginal utility for X and for Y? b. Suppose the price of X is equal to 4 and the price of Y equal to 6. What is the utility maximizing proportion of X and Y in his consumption? {construct the budget constraint) c. If the total amount...
Suppose that Jessica has income Y and has preferences over hamburgers and movie tickets. Her budget...
Suppose that Jessica has income Y and has preferences over hamburgers and movie tickets. Her budget constraint is: Y = Ph*h+Pm*m. Where Ph and Pm denote the price of hamburgers and movie tickets and h and m their quantity. Assume that Jessica's income is equal to $400 and that each hamburger costs $4 and each ticket costs $8. Draw the budget constraint as well as an indifference curve that satisfies the condition for utility maximization. Please fully label the graph....
Utility Maximization with Substitutes Carol needs to decide how to spend her wealth on fish and...
Utility Maximization with Substitutes Carol needs to decide how to spend her wealth on fish and chicken. For Carol, 1 lb of fish is equivalent to 2 lb of chicken. Her preferences can be represented by the utility function u(x, y) = 2x +y where x is the quantity of fish (in lbs) and y is the quantity of chicken (in lbs). The consumption set is R 2 +. (a) Draw two typical indifference curves for Carol, one corresponding to...
Consider the two-period model from Chapter 9, and assume there is one representative consumer with utility...
Consider the two-period model from Chapter 9, and assume there is one representative consumer with utility function uc,d) = Iníc) + In(d), so the time discount factor is 3 = 1. There is also a government that levies lump-sum taxes in the current and future periods. The government has expenditures of G = 580 in the current period and G' = 630 in the future period. (a) Suppose the consumer has current and future income (w.y') = (3500, 6510), and...
l. A consumer has €100 of income to allocate between chocolate and soda. Chocolate costs per unit. (a) Suppose when soda costs 4 per unit, the consumer chooses 20 sodas. Draw the budget constraint and indifference curve to represent this budget and choice. (You can assume that the indifferences curves are regular, ie convex to the origin.) Now the company introduces a deal whereby the price falls to є3.00 if the consumer buys more than 20 sodas. So if the...
Consider a consumer with a utility function u(x1, x2) = min{21, 222}. Suppose the prices of good 1 and good 2 are p1 = P2 = 4. The consumer's income is m = 120. (a) Find the consumer's preferred bundle. (b) Draw the consumer's budget line. (c) On the same graph, indicate the consumer's preferred bundle and draw the indifference curve through it. (d) Now suppose that the consumer gets a discount on good 1: each unit beyond the 4th...
1. SHORT ANSWER QUESTIONS 1. Explain why utility maximization requires that a consumer's budget is allocated so that the marginal utility per dollar of expenditure is the same for each good. 2. Theresa likes to talk on the telephone. We can represent her preferences with the utility function U(B,J)12B 24J, where B and J are minutes of conversation per month with Bill and Jackie respectivcly. What is the formula for her indiffcrencc curve to get U units of utility (that...
1. Bobby is a college student who has €500 of income to spend each semester on books and pizzas. The price of a pizza is €10 and the price of a book is є50. Suppose he consumes 20 pizzas. (a) Assuming that Bobby wants to maximie utility, draw Bobby's budget constraint and indifference curve. (b) Now, suppose Bobby's parents buy him a €300 gift certificate each semester that can only be used to buy You can assume that his indifference...
4. Indifference curves and utility maximization Teresa is in a band and likes to advertise upcoming shows using flyers she posts around the city. Making one black-and-white flyer costs $0.05, and making a flyer in color costs $0.20. Teresa budgets $40.00 for making flyers each month. The following graph shows three of Teresa's indifference curves for the number of black-and-white and color flyers that she makes. Use the green line (triangle symbol) to plot Teresa's budget constraint. Then, place the...
Suppose that there two goods X and Y, available in arbitrary non- negative quantities (so the the consumption set is R2). The consumer has preferences over consumption bundles that are strongly monotone, strictly convex, and represented by the following (differentiable) utility function: u(x, y)-y+2aVT, where z is the quantity of good X, and y is the quantity of good Y, and a 20 is a utility parameter The consumer has strictly positive wealth w > 0. The price of good...
(10 Question 1: marks) Given is the Total Utility Function along with Budget Constraint: Utility Function: U (X, Y) = X°.270.3 Budget Constraint: I = XP, + YP, a. What is the consumer's marginal utility for X and for Y? b. Suppose the price of X is equal to 4 and the price of Y equal to 6. What is the utility maximizing proportion of X and Y in his consumption? {construct the budget constraint) c. If the total amount...
Consider the two-period model from Chapter 9, and assume there is one representative consumer with utility function uc,d) = Iníc) + In(d), so the time discount factor is 3 = 1. There is also a government that levies lump-sum taxes in the current and future periods. The government has expenditures of G = 580 in the current period and G' = 630 in the future period. (a) Suppose the consumer has current and future income (w.y') = (3500, 6510), and...
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