ZuoTi.Pro
Question

Question 3: Paris has a utility function over berries (denoted by B) and chocolate (denoted by C) as follows: UB, c) =-In(B) +-In(C) The price of berries and chocolate is pB and pc,respectively. Pariss income is m. 1. What preferences does this utility function represent? 2. Find the MRSBc as a function of B and C assuming B is on the x-axis. 3. Find the optimal bundle B and C as a function of income and prices using the tangency condition. 4. What is the fraction of total expenditure spent on berries and chocolate out of total income, respectively? Now suppose Paris has an income of $300. The price of a container of berries is $5 and the price of a chocolate bar is $4. Find the numerical answers for the optimal bundle, by plugging the numbers into the solution you found in Q3.3. 5.

business   economics   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

(3) Ansuey iven thab aris has o uilyunction ovev berries (denoted by B) ond chocolate (doneted byc) as FolloS 3 The price of berries ond chocolote is P and Po res pectivels Paris Is in come iS m (i) This utiliFunction s logavithmic tvansformation of cobb Darglos utiliks function u (6, c) (B) ce) 113 Soj it represent Cobb Douglof lI MRSe 3 G 3 C 2 23 2 3 e pro portion oF Lota9 expendituve spent on berr ier is l3 ond that an chocolote the ex pa nent IS 23 Tt IS Same as Value 20units 50

0 0
Add a comment
Know the answer?
Add Answer to:
Question 3: Paris has a utility function over berries (denoted by B) and chocolate (denoted by...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Question 6: Logan has preferences over olives ) and ice creams (x2). He prefers to eat...

    Question 6: Logan has preferences over olives ) and ice creams (x2). He prefers to eat them separately but not together, which is represented by: Also suppose his income is $100 and the prices of olives and ice creames arepx$1 and Pr2 $2,respectively. 1. Is this convex preferences or concave preferences? 2. Solve for the bundle that satisfis the tangency condition. 3. What's the level of utility using the bundle you just solved in Q6.2? 4. Consider spending all of...

  • Question 6: Logan has preferences over olives (x1) and ice creams (x2). He prefers to eat...

    Question 6: Logan has preferences over olives (x1) and ice creams (x2). He prefers to eat them separately but not together, which is represented by: U(X1, X2) = x + xỉ. Also suppose his income is $100 and the prices of olives and ice creames are px, = $1 and Px2 = $2, respectively. 1. Is this convex preferences or concave preferences? 2. Solve for the bundle that satisfis the tangency condition. 3. What's the level of utility using the...

  • 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)...

  • Question 2: Lorelai's choice behavior can be represented by the utility function u(x1, 2)0.9Inx)0.1x2 The prices...

    Question 2: Lorelai's choice behavior can be represented by the utility function u(x1, 2)0.9Inx)0.1x2 The prices of both x1 and x2 are $5 and she has an income of $40. 1. What preference does this utility function represent? (Hint: the utility is function is not linear, 2. Drawinwg indifference curves: you can copy down the graph on your paper using econgraphs. Set but at least linear in good x2) the preferences and parameters accordingly as given in the question. Click...

  • 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.

  • Diogo has a utility​ function, ​U(q1, q2) = q1^.8q2^.2, where q1 is chocolate candy and q2...

    Diogo has a utility​ function, ​U(q1, q2) = q1^.8q2^.2, where q1 is chocolate candy and q2 is slices of pie. If the price of slices of​ pie, p2​, is ​$5.00​, the price of chocolate​ candy, p1​, is ​$10.00​, and​ income, Y, is ​$100​, what is​ Diogo's optimal​ bundle? The optimal value of good q1 is?

  • Lorelai's choice behavior can be represented by the utility function 11(xi, X2) = 0.91n(xi) + 0.1x2...

    Lorelai's choice behavior can be represented by the utility function 11(xi, X2) = 0.91n(xi) + 0.1x2 The prices of both x and x2 are $5 and she has an income of $40. 1. What preference does this utility function represent? (Hint: the utility is function is not linear, but at least linear in good x2.) 2. Drawinwg indifference curves: you can copy down the graph on your paper using econgraphs. Set the preferences and parameters accordingly as given in the...

  • Donna and Jim are two consumers purchasing strawberries and chocolate. Jim’s utility function is U(x,y) =...

    Donna and Jim are two consumers purchasing strawberries and chocolate. Jim’s utility function is U(x,y) = xy and Donna’s utility function is U(x,y) = x2y where x is strawberries and y is chocolate. Jim’s marginal utility functions are MUX=y and MUy=x while Donna’s are MUX=2xy and MUy=x2. Jim’s income is $100, and Donna’s income is $150. What is the optimal bundle for Donna if the price of strawberries is $2 and the price of chocolate is $4?

  • Lorelai's choice behavior can be represented by the utility function u(x1, 2) 0.9n(x)0.1x2. The prices of...

    Lorelai's choice behavior can be represented by the utility function u(x1, 2) 0.9n(x)0.1x2. The prices of both xi and x2 are $5 and she has an income of $40. 1. What preference does this utility function represent? (Hint: the utility is function is not linear, but at least linear in good x2) 2. Drawinwg indifference curves: you can copy down the graph on your paper using econgraphs. Set the preferences and parameters accordingly as given in the question. Click on...

  • 5. A consumer's preferences are given by the utility function U-2 2 The price of good 1 is 3 and the price of 2 is...

    5. A consumer's preferences are given by the utility function U-2 2 The price of good 1 is 3 and the price of 2 is 6, while her income is 36. The utility maximising bundle for the consumer is a. xi = 4, = 4 b. x1 = 4,=3 c. ri = 2 = 6 d. x = 8,5 = 2 e. None of the above 6. A consumer's preferences are given by the utility function U = . The...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT