Suppose there are 2 commodities (good x and good y) and the consumer faces the following prices. The price of commodity x is $1 each. The price of commodity y is $2 each if strictly less than 2 units are purchased. If 2 or more units are purchased, it is $1.50 each. If the consumer has an income of $10, show that the budget set faced by the consumer is not a convex set.
Suppose there are 2 commodities (good x and good y) and the consumer faces the following...
Suppose there are 2 commodities (good x and good y) and the consumer faces the following prices. The price of commodity x is $1 each. The price of commodity y is $2 each if strictly less than 2 units are purchased. If 2 or more units are purchased, it is $1.50 each. If the consumer has an income of $10, show that the budget set faced by the consumer is not a convex set.
2. Suppose there are two consumers, A and B, and two goods, X and Y. Consumer A is given an initial endowment of 2 units of good X and 3 units of good Y. Consumer B is given an initial endowment of 6 units of good X and 5 units of good Y. Consumer A’s utility function is given by: UA(X,Y) = X1/2*Y1/2, And consumer B’s utility function is given by UB(X,Y) = X1/4*Y3/4. Therefore, consumer A’s marginal utilities for...
Suppose that a consumer has preferences over bundles of non-negative amounts of each of two commodities that involve each commodity being good up to a point and then becoming bad. The consumer’s consumption set is R2+. 1. Illustrate the indifference curve map for the consumer. 2. Indicate the direction of increasing utility for the consumer.
Consider a two good world, with commodities X and Y. If Y is an inferior good, then an increase in consumer income cannot a. Decrease the demand for Y B. Decrease the demand for X c. Increase the demand for X d. Make the consumer better of
Problem 1 You have an income of $50 to spend on two commodities. The price of commodity 2 is constant at $1. Assume that whatever you purchase, you must consume 1. The price of commodity 1 is $2 for the first 15 units, but $1 for each additional unit exceeding 15. Draw the budget set. 2. Suppose now that the price of good 1 is constant at $2. The government taxes $2 per unit on commodity 1 and 5% per...
Q1. Suppose consumer consumes two goods, X and Y. The price of X is P x , price of Y is P Y and the consumer income is m. a. Derive and interpret the budget constraint and its slope. b. If slope is -3, how will you interpret it? c. Suppose a government wants to discourage the excessive consumption of X and decides to impose a tax t 1 if someone consume more than X 1 but less than X...
Suppose the price of Good X is $4 and the price of Good Y is $3. If a consumer has a Marginal Rate of Substitution (MRSxy) of 2 for the bundle they are considering, then given their budget constraint, the consumer... Select one O a. Cannot reach a higher level of utility given their budget constraint. Ob. Would have a higher utility if they bought more of Good X. c. Would have a higher utility if they bought less of...
Please show work and explain
EXERCISE 2 A consumer consumes one consumption good x and hours of leisure h. The price of the consumption good is 1. The consumer earns wage rate s per hour for the first eight hours of work, and s' > s for additional overtime hours. He also faces a tax rate per dollar on labor income earned above amount M. Draw the budget set. Assume M < 8s, which means that the consumer does not...
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...
Assume good X is on the horizontal axis, and good Y is on the vertical axis. If a consumer's budget constraint has a slope that is less than -1: O the price of good X is greater than the price of good Y. O the consumer gets more utility from good X than from good Y. O the price of good X is less than the price of good Y. O the consumer gets less utility from good X than...