Homework Answers
Answer :-
(1) Utility is a term in economics that refers to the total satisfaction received from consuming a good or service. Economic theories based on rational choice usually assume that consumers will strive to maximize their utility.
Measures of objective utility vary. One measure uses contribution to realization of basic goods. Life is a basic good. Water is necessary for life. So water has high objective utility using this measure.
2 According to the law of diminishing marginal utility, it declines to additional satisfaction or utility as a consumer acquires additional units of a given product
Utility refers to the satisfaction of pleasure one gets from consuming a good or service, whereas usefulness refers to the practical and functional use the good or service actually serves
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In economics, utility is the objective that consumers wish to maximize. (1) Explain what is being...
13. In economics, an individual person is assumed to be rational and self-interested seeking to maximize...
13. In economics, an individual person is assumed to be rational and self-interested seeking to maximize utility in various ways including from the consumption of goods and services. What one does is to achieve a certain goal. So he/she is rational. Why one does is to feel good or happy. So he/she is a self-interested utility seeker. The term 'utility' means satisfaction or happiness. Utility is difficult to quantify. But for purposes of illustration we assume that people can measure...
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3) he theory of consumer behavior assumes that consumers attempt to maximize A) marginal utility. 1) the difference between total and marginal utility. C) average utility. D) total utility. 34) The law of diminishing marginal utility states that A) beyond some point, additional units of a product will yield less and less extra satisfaction to a consumer. B) price must be lowered to induce firms to supply more of a product C) it will take larger and larger amounts of...
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3. Consider two consumers, A and B, who both maximize the same logarithmic utility function, U...
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A consumer must maximize utility, U-f(x.y), subject to the constraint that she spends all her inc...
A consumer must maximize utility, U-f(x.y), subject to the constraint that she spends all her income, M on purchasing two goods x, v. The unit prices of the goods, px and py respectively, are market determined and hence exogenous. (i) State the objective function, constraint, and choice variables of this problem (3 marks) (ii) Obtain the Lagrangean for this problem, using λ to represent the Lagrange multiplier. (3 marks) (i) Obtain the first order conditions of this problem in terms...
A consumer must maximize utility, U-for.y), subject to the constraint that she spends all her inc...
A consumer must maximize utility, U-for.y), subject to the constraint that she spends all her income, M on purchasing two goods x, y. The unit prices of the goods, p, and py respectively, are market determined and hence exogenous (3 marks) (3 marks) rKS rice marks) (i e1 (2 marks) 0.8,0.2 (d) Let the utility function be U -5x ф Solve the maximization problem in this case (that is obtain x*, y*, 8y0.z and unit prices pr - p- 1...
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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...
Consider a consumer whose utility function is given by U(x, y) = x^1/3 y^2/3, where x...
Consider a consumer whose utility function is given by U(x, y) = x^1/3 y^2/3, where x and y represent quantities of consumption of two consumer goods. (a) If the consumer’s income is $100 and the prices of x and y are both $1, how should the consumer maximize her utility? What is her maximum level of utility? (b) If the price of y rose to $2, what would be the resulting income and substitution effects? Illustrate your answer.
Consider an economy with two consumers A and B. Consumers A and B have utility functions...
Consider an economy with two consumers A and B. Consumers A and B have utility functions u(x+x)= Inx;" + Inx, and (x,x) - Inx' +-Inx, respectively. They face prices P, and P, for good 1 and good 2, respectively, and they have incomes “and I°, respectively a) Write formally the economic problem faced by consumer A and derive the demand functions xi (P1, P2,7") and x(P,P2,7^) [6] b) What are consumer B's demand functions for the two goods 1 and...
1) Explain the relationship between total utility, marginal utility, and average utility. 2) What is consumer...
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13. In economics, an individual person is assumed to be rational and self-interested seeking to maximize utility in various ways including from the consumption of goods and services. What one does is to achieve a certain goal. So he/she is rational. Why one does is to feel good or happy. So he/she is a self-interested utility seeker. The term 'utility' means satisfaction or happiness. Utility is difficult to quantify. But for purposes of illustration we assume that people can measure...
3) he theory of consumer behavior assumes that consumers attempt to maximize A) marginal utility. 1) the difference between total and marginal utility. C) average utility. D) total utility. 34) The law of diminishing marginal utility states that A) beyond some point, additional units of a product will yield less and less extra satisfaction to a consumer. B) price must be lowered to induce firms to supply more of a product C) it will take larger and larger amounts of...
CENGAGE MINDTAP Q Search this course Numbers and Graphs: Consumer Choice: Maximizing Utility and Behavioral Economics (Ch 20) 4. Working with Numbers and Graphs Q4 Each unit of good X costs $2, and each unit of good Y costs $1. The following table contains information on Gilberto's utility from goods X and Y. Total Utility of Good X (Utils) Total Utility of Good Y (utils) Units of Good x Units of Good Y 20 38 33 52 un WN Suppose...
3. Consider two consumers, A and B, who both maximize the same logarithmic utility function, U = In 1 + In C2, and face the same real interest rate, r=.04: Consumer Y1-TI Y2-T2 A 20,000 10,400 10000 20, 800 What are the levels of C1, C2 and saving in period 1 for each? Suppose both face a borrowing constraint that limits borrowing to no more than 1000. Now describe the consumption choices for each. Explain. With the constraint in place,...
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A consumer must maximize utility, U-for.y), subject to the constraint that she spends all her income, M on purchasing two goods x, y. The unit prices of the goods, p, and py respectively, are market determined and hence exogenous (3 marks) (3 marks) rKS rice marks) (i e1 (2 marks) 0.8,0.2 (d) Let the utility function be U -5x ф Solve the maximization problem in this case (that is obtain x*, y*, 8y0.z and unit prices pr - p- 1...
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