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Good Y Good X The diagram above shows a budget constraint on Good X and Good...
Homework 3 Chapter 5: Demand 1. What happens to the amount of x and y consumed...
Homework 3 Chapter 5: Demand 1. What happens to the amount of x and y consumed when income falls if x and y are normal goods? Draw a budget constraint (before the income decrease) and a convex utility curve that corresponds to the optimal consumption bundle. Draw a new budget constraint (after income falls) and a new convex utility curve that corresponds to the optimal consumption bundle. Has the amount of x and y consumed increased or decreased due to...
1. (24 total points) Suppose a consumer’s utility function is given by U(X,Y) = X1/2*Y1/2. Also,...
1. (24 total points) Suppose a consumer’s utility function is given by U(X,Y) = X1/2*Y1/2. Also, the consumer has $72 to spend, and the price of Good X, PX = $4. Let Good Y be a composite good whose price is PY = $1. So on the Y-axis, we are graphing the amount of money that the consumer has available to spend on all other goods for any given value of X. a) (2 points) How much X and Y...
Q02 A consumer is choosing between good 'X' and a composite good Y.' The price of...
Q02 A consumer is choosing between good 'X' and a composite good Y.' The price of 1 unit of good X is $2. The below diagram shows the consequences of a change in the price of good X.' The initial pre-change optimal bindle is the new post-change optimal consumption bundle is Ez. Use the information provided in the diagram to answer the following questions. a. Did the price of 1 unit of good 'X' increase or decrease? b. Use the...
7. Consider the figure below, which shows the budget constraint and the indifference curves of good...
7. Consider the figure below, which shows the budget constraint and the indifference curves of good King Zog. Zog is in equilibrium with an income of s300, facing prices px 4 and py sio 30 22.5 0 35 43 75 90 a. How much X does Zog consume? b. If the price of X falls to s2.50, while income and the price of Y stay constant, how much X will Zog consume? c. How much income must be taken away...
2. Identifying normal, inferior, and Giffen goods The green line BC, on the following graph represents...
2. Identifying normal, inferior, and Giffen goods The green line BC, on the following graph represents your initial budget constraint for good X and good Y, and point A represents the optimal consumption choice, given this choice set. Suppose the price of good X dropped by 50%. The compensated budget is parallel to BC2, representing the same tradeoff between good X and good Y, and it is tangent to the given indifference curve (U) at point B. On the following...
Jane commutes to work. She can either use public transport or her own car. Her indifference curve...
Jane commutes to work. She can either use public transport or her own car. Her indifference curves obey the four properties of indifference curves for ordinary goods 1. Draw Jane's budget line (BL,) with car travel on the vertical axis and public transport on the horizontal axis 2. Suppose that Jane consumes some of both goods. Explain how her optimal consumption bundle can be obtained. Then, draw an indifference curve that helps you illustrate that optimal consumption bundle represented by...
4. MRSxy= , and budget line 400 = 10x + 20y a. What is the optimal...
4. MRSxy= , and budget line 400 = 10x + 20y a. What is the optimal bundle of x and y? Depict this graphically. b. Suppose the price of good x falls to $7, what is the new optimal bundle? Show on graph above. c. What is the total effect on good x) of the price decrease? d. What is the Substitution and Income effects? E-ONLY V e. Is the good a normal good or inferior good? Why?
Bnnas O al UI IImelioRO0d T0l DClla! Eplalli. 2. Suppose that a consumer has utility U(X,...
Bnnas O al UI IImelioRO0d T0l DClla! Eplalli. 2. Suppose that a consumer has utility U(X, Y) goods X and Y a) The prices of X and Y are S1 and $2 per unit respectively. Use a Lagrangian to solve for the optimal basket of goods. b) Suppose that the price of X increases to $2 per unit. Use a Lagrangian to solve for the new optimal basket of goods. Find the total effect of the price change on the...
Sally consumes two goods, X and Y. Her preferences over consumption bundles are repre- sented by the utility function r...
Sally consumes two goods, X and Y. Her preferences over consumption bundles are repre- sented by the utility function r, y)- .5,2 where denotes the quantity of good X and y denotes the quantity of good Y. The current market price for X is px 10 while the market price for Y is Pr = $5. Sally's current income is $500. (a) Write the expression for Sally's budget constraint. (1 point) (b) Find the optimal consumption bundle that Sally will...
4) Assume that you are consuming Pepsi and Coke only and you consider them as perfect...
4) Assume that you are consuming Pepsi and Coke only and you consider them as perfect substitute one can of Pepsi for one can of Coke. Assume that the price of Pepsi is $1 per can and price of Coke is $3 per can and that your income is $30. a) Draw the budget constraint and indifference curve as needed. b) Show the optimal consumption bundle on your graph. c) Now assume that price of Pepsi increase to $2. What...
Homework 3 Chapter 5: Demand 1. What happens to the amount of x and y consumed when income falls if x and y are normal goods? Draw a budget constraint (before the income decrease) and a convex utility curve that corresponds to the optimal consumption bundle. Draw a new budget constraint (after income falls) and a new convex utility curve that corresponds to the optimal consumption bundle. Has the amount of x and y consumed increased or decreased due to...
Q02 A consumer is choosing between good 'X' and a composite good Y.' The price of 1 unit of good X is $2. The below diagram shows the consequences of a change in the price of good X.' The initial pre-change optimal bindle is the new post-change optimal consumption bundle is Ez. Use the information provided in the diagram to answer the following questions. a. Did the price of 1 unit of good 'X' increase or decrease? b. Use the...
7. Consider the figure below, which shows the budget constraint and the indifference curves of good King Zog. Zog is in equilibrium with an income of s300, facing prices px 4 and py sio 30 22.5 0 35 43 75 90 a. How much X does Zog consume? b. If the price of X falls to s2.50, while income and the price of Y stay constant, how much X will Zog consume? c. How much income must be taken away...
2. Identifying normal, inferior, and Giffen goods The green line BC, on the following graph represents your initial budget constraint for good X and good Y, and point A represents the optimal consumption choice, given this choice set. Suppose the price of good X dropped by 50%. The compensated budget is parallel to BC2, representing the same tradeoff between good X and good Y, and it is tangent to the given indifference curve (U) at point B. On the following...
Jane commutes to work. She can either use public transport or her own car. Her indifference curves obey the four properties of indifference curves for ordinary goods 1. Draw Jane's budget line (BL,) with car travel on the vertical axis and public transport on the horizontal axis 2. Suppose that Jane consumes some of both goods. Explain how her optimal consumption bundle can be obtained. Then, draw an indifference curve that helps you illustrate that optimal consumption bundle represented by...
4. MRSxy= , and budget line 400 = 10x + 20y a. What is the optimal bundle of x and y? Depict this graphically. b. Suppose the price of good x falls to $7, what is the new optimal bundle? Show on graph above. c. What is the total effect on good x) of the price decrease? d. What is the Substitution and Income effects? E-ONLY V e. Is the good a normal good or inferior good? Why?
Bnnas O al UI IImelioRO0d T0l DClla! Eplalli. 2. Suppose that a consumer has utility U(X, Y) goods X and Y a) The prices of X and Y are S1 and $2 per unit respectively. Use a Lagrangian to solve for the optimal basket of goods. b) Suppose that the price of X increases to $2 per unit. Use a Lagrangian to solve for the new optimal basket of goods. Find the total effect of the price change on the...
Sally consumes two goods, X and Y. Her preferences over consumption bundles are repre- sented by the utility function r, y)- .5,2 where denotes the quantity of good X and y denotes the quantity of good Y. The current market price for X is px 10 while the market price for Y is Pr = $5. Sally's current income is $500. (a) Write the expression for Sally's budget constraint. (1 point) (b) Find the optimal consumption bundle that Sally will...
4) Assume that you are consuming Pepsi and Coke only and you consider them as perfect substitute one can of Pepsi for one can of Coke. Assume that the price of Pepsi is $1 per can and price of Coke is $3 per can and that your income is $30. a) Draw the budget constraint and indifference curve as needed. b) Show the optimal consumption bundle on your graph. c) Now assume that price of Pepsi increase to $2. What...
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