Homework Answers
answer c)
Amr's IC. , Red colour when U = 8
Blue colour if U = 18
Answer d) IC for Chris , green colour if u = 8
Black Colour if U = 18
Now answer e) when u = 8
At (8,8), both person IC intersect , when U= 8
At (18,18), intersection takes place when U= 18
Amr's IC are steeper
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1. Two consumers, Amr and Chris, have utility functions that depend on their consumption of 2...
Preferences. 1. Two consumers, Amr and Chris, have utility functions that depend on their consumption of...
Preferences. 1. Two consumers, Amr and Chris, have utility functions that depend on their consumption of 2 goods: Books on Monetary Economics (M), and Books on Economic Development (D): Amr’s Utility = ?? 1 5?? 4 5 and Chris’s Utility = ?? 1 2?? 1 2. a. What is each consumer’s Marginal Rate of Substitution � ???? ????�, i.e., conceiving of D as the horizontal axis good? b. Which consumer “likes” Economic Development books more? c. Graph Amr’s indifference curves...
Question 16 1 pts A typical indifference curve is negatively sloped because: as we consume more...
Question 16 1 pts A typical indifference curve is negatively sloped because: as we consume more of one good, we are willing to give up the consumption of another good without changing our utility higher indifference curves represent higher levels of utility higher indifference curves represent lower levels of utility we assume that a consumer's income is constant Question 17 1 pts A typical indifference curve: O is convex to the origin (bowed in) has a constant slope is concave...
24. Consider a consumer with a utility function of u(x,y)=xy. (10 total) a) Draw to scale...
24. Consider a consumer with a utility function of u(x,y)=xy. (10 total) a) Draw to scale the consumer's indifference curves for u(x,y)=100 and u(xy)=400. (2) b) Verify the both x and y are "goods" rather than "bads." (3) c) Verify that the law of diminishing marginal rate of substitution holds. (3) d) Suppose that the utility numbers assigned to bundles are determined by the formula (xy) Vxy, instead of u(x,y)= xy. How does the change in the formula change the...
2. Janice consumes two goods, X and Y. Janice has a utility function given by the...
2. Janice consumes two goods, X and Y. Janice has a utility function given by the expression: U = 4x0.5y 0.5 The current prices of X and Y are $25 and $50, respectively. Janice currently has an income of $750 per time period (Put X on the horizontal axis and Y on the vertical axis). a) Is the assumption that "more is better” satisfied for both goods? b) Calculate MRSxy. Determine if it is diminishing for this utility function. c)...
Please give a detailed solution, thank you! 4. Two consumers (call them A and B) have utility functions over consumption...
Please give a detailed
solution, thank you!
4. Two consumers (call them A and B) have utility functions over consumption in period 1 and consumption in period 2 given by U (1,C2)n(c)ln(c2) In period 1, consumer A receives income of y 2, the endowments are reversed, consumer A gets y= 120 and consumer B gets y = 80 80 and consumer B receives y? = 120. In period (so they just a. First assume consumers are not allowed to save...
Indifference curves and utility: Consider the utility function ? (?1, ?2) = 6?1^1/2 + ?2 that...
Indifference curves and utility: Consider the utility function ? (?1, ?2) = 6?1^1/2 + ?2 that describes Moe’spreferences. For the following, think of q1 as the variable you would graph on the horizontal axis. a. Derive an expression for his marginal utility (U1) from a small increase in q1 holding q2 fixed. Also, find U2. b. What is Moe’s marginal rate of substitution (MRS)? Give a brief (2 sentences maximum) intuitive description of what MRS represents. c. Given your answer...
Consider the utility function U(x,y) = 3x+y, with MUx=3 and MUy=1 a) Is the assumption that...
Consider the utility function U(x,y) = 3x+y, with MUx=3 and MUy=1 a) Is the assumption that more is better satisfied for both goods b) Does the marginal utility of x diminish, remain constant, or increase as the consumer buys more x? Explain. c)What is MRS x,y? d) Is MRS x,y diminishing, constant, or increasing as the consumer substitutes x for y along an indifference curve? e) On a graph with x on the horizontal axis and y on the vertical...
Consider the utility function U(x,y) = 3x+y, with MUx=3 and MUy=1 a) Is the assumption that...
Consider the utility function U(x,y) = 3x+y, with MUx=3 and MUy=1 a) Is the assumption that more is better satisfied for both goods b) Does the marginal utility of x diminish, remain constant, or increase as the consumer buys more x? Explain. c)What is MRS x,y? d) Is MRS x,y diminishing, constant, or increasing as the consumer substitutes x for y along an indifference curve? e) On a graph with x on the horizontal axis and y on the vertical...
Suppose a consumer views two goods, X and Y, as perfect complements. Her utility function is...
Suppose a consumer views two goods, X and Y, as perfect complements. Her utility function is given by U = MIN [2X, Y]. Sketch the graph of the consumers indifference curve that goes through the bundle X = 7 and Y = 8. Put the amount of Y on the vertical axis, and the amount of X on the horizontal axis. Which of the three assumptions that we made about consumer preferences is violated in this case?
3. Suppose there are two consumers, A and B. The utility functions of each consumer are...
3. Suppose there are two consumers, A and B. The utility functions of each consumer are given by: Up(X,Y) = X + 2Y The initial endowments are: A:X=2; Y = 8 a) Using an Edgeworth Box, graph the initial allocation (label it "W") and draw the indifference curve for each consumer that runs through the initial allocation. Be sure to label your graph carefully and accurately. b) What is the marginal rate of substitution for consumer A at the initial...
Question 16 1 pts A typical indifference curve is negatively sloped because: as we consume more of one good, we are willing to give up the consumption of another good without changing our utility higher indifference curves represent higher levels of utility higher indifference curves represent lower levels of utility we assume that a consumer's income is constant Question 17 1 pts A typical indifference curve: O is convex to the origin (bowed in) has a constant slope is concave...
24. Consider a consumer with a utility function of u(x,y)=xy. (10 total) a) Draw to scale the consumer's indifference curves for u(x,y)=100 and u(xy)=400. (2) b) Verify the both x and y are "goods" rather than "bads." (3) c) Verify that the law of diminishing marginal rate of substitution holds. (3) d) Suppose that the utility numbers assigned to bundles are determined by the formula (xy) Vxy, instead of u(x,y)= xy. How does the change in the formula change the...
2. Janice consumes two goods, X and Y. Janice has a utility function given by the expression: U = 4x0.5y 0.5 The current prices of X and Y are $25 and $50, respectively. Janice currently has an income of $750 per time period (Put X on the horizontal axis and Y on the vertical axis). a) Is the assumption that "more is better” satisfied for both goods? b) Calculate MRSxy. Determine if it is diminishing for this utility function. c)...
Please give a detailed
solution, thank you!
4. Two consumers (call them A and B) have utility functions over consumption in period 1 and consumption in period 2 given by U (1,C2)n(c)ln(c2) In period 1, consumer A receives income of y 2, the endowments are reversed, consumer A gets y= 120 and consumer B gets y = 80 80 and consumer B receives y? = 120. In period (so they just a. First assume consumers are not allowed to save...
3. Suppose there are two consumers, A and B. The utility functions of each consumer are given by: Up(X,Y) = X + 2Y The initial endowments are: A:X=2; Y = 8 a) Using an Edgeworth Box, graph the initial allocation (label it "W") and draw the indifference curve for each consumer that runs through the initial allocation. Be sure to label your graph carefully and accurately. b) What is the marginal rate of substitution for consumer A at the initial...
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