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1. A consumer maximizes his utility function, 122, subject to the budget constraint,...
Suppose a person has a utility function U(x1,x2)= xa1+xa2, which she maximizes subject to her budget...
Suppose a person has a utility function U(x1,x2)= xa1+xa2, which
she maximizes subject to her budget constraint, px1 + qx2 = m,
where p, q, m are all positive. Use the Lagrangian method to solve
the maximization problem, and find the demand functions for the
consumer. Show that the demand functions are homogeneous of degree
zero in prices (p, q) and income (m)
(2.5 marks) Suppose a person has a utility function U(x1, x2) = xq +xm, which she maximizes...
please help me the best you can Part 1: Optimization with inequality constraints 1. A consumer...
please help me the best you can
Part 1: Optimization with inequality constraints 1. A consumer lives on an island. Her utility function is U = (x²y)1/3. She produces two goods, x and y. She faces a production constraint and an environmental constraint: Her production possibility frontier is: x² + y2 s 300. She faces an environmental constraint given by x + y = 200. a) Set up the Lagrangian function. b) List all of the Kuhn-Tucker conditions. c) Interpret...
Each individual consumer takes the prices as given and chooses her consumption bundle, (r, 2) R, by maximizing...
Each individual consumer takes the prices as given and chooses her consumption bundle, (r, 2) R, by maximizing the utility function U (r1, T)= In(xr2), subject to the budget constraint pi 1 + p2 2 900 (a) (3 points) Write out the Lagrangian function for the consumer's problem (b) (6 points) Write out the system of first-order conditions for the consumer's problem (e) (6 points) Solve the system of first-order conditions to find the optimal values of r and r2....
Question 1 (20 marks) (a) A consumer maximizes utility and has Bernoulli utility function u(w)/2. The...
Question 1 (20 marks) (a) A consumer maximizes utility and has Bernoulli utility function u(w)/2. The consumer has initial wealth w 1000 and faces two potential losses. With probability 0.1, the consumer loses S100, and with probability 0.2, the consumer loses $50. Assume that both losses cannot occur at the same time. What is the most this consumer would be willing to pay for full insurance against these losses? (10 marks) (b) A consumer has utility function u(z, y) In(x)...
2*. Assume that Bob has a budget constraint p1x1 + p2x2 = m, and that his...
2*. Assume that Bob has a budget constraint p1x1 + p2x2 = m, and that his preferences are represented by the Cobb-Douglas utility function U(x1, x2) = x1 c x2 d , where c>0 and d>0. State Bob’s optimization (utility maximization) problem. a) Set up the Lagrangian function. b) Derive the necessary conditions (the first-order conditions) for an optimal interior solution. c) Show that the MRS (the slope of the indifference curve) is equal to the slope of the budget...
2*. Assume that Bob has a budget constraint p1x1 + p2x2 = m, and that his...
2*. Assume that Bob has a budget constraint p1x1 + p2x2 = m, and that his preferences are represented by the Cobb-Douglas utility function U(x1, x2) = x1 c x2 d , where c>0 and d>0. State Bob’s optimization (utility maximization) problem. a) Set up the Lagrangian function. b) Derive the necessary conditions (the first-order conditions) for an optimal interior solution. c) Show that the MRS (the slope of the indifference curve) is equal to the slope of the budget...
Question 1. (Consumption-Saving Problem): Suppose that a consumer lives for two periods. The utility function of...
Question 1. (Consumption-Saving Problem): Suppose that a consumer lives for two periods. The utility function of the consumer is given by with u> 0 where c and c2 are consumption in period 1 and period 2 respectively. Sup- pose that consumer has income y in the first period, but has no income in the second period. Consumer has to save in the first period in order to consume in the second period. Let s be the savings in the first...
Question 1. (Consumption-Saving Problem): Suppose that a consumer lives for two periods. The utility function of...
Question 1. (Consumption-Saving Problem): Suppose that a consumer lives for two periods. The utility function of the consumer is given by with u> 0 where c and c2 are consumption in period 1 and period 2 respectively. Sup- pose that consumer has income y in the first period, but has no income in the second period. Consumer has to save in the first period in order to consume in the second period. Let s be the savings in the first...
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...
S An individual has a utility function as follows subject to the budget constraint; 6r+2y 110 i) Write down the Lagrangian function for this individual. (2 marks) (6 marks) Using Cramer's rule...
S An individual has a utility function as follows subject to the budget constraint; 6r+2y 110 i) Write down the Lagrangian function for this individual. (2 marks) (6 marks) Using Cramer's rule, solve for x, y and 2. ii) Using Hessian matrix, check the second-order sufficient condition to verify that the utility of this individual is at maximum. (3 marks)
S An individual has a utility function as follows subject to the budget constraint; 6r+2y 110 i) Write down the...
Suppose a person has a utility function U(x1,x2)= xa1+xa2, which
she maximizes subject to her budget constraint, px1 + qx2 = m,
where p, q, m are all positive. Use the Lagrangian method to solve
the maximization problem, and find the demand functions for the
consumer. Show that the demand functions are homogeneous of degree
zero in prices (p, q) and income (m)
(2.5 marks) Suppose a person has a utility function U(x1, x2) = xq +xm, which she maximizes...
please help me the best you can
Part 1: Optimization with inequality constraints 1. A consumer lives on an island. Her utility function is U = (x²y)1/3. She produces two goods, x and y. She faces a production constraint and an environmental constraint: Her production possibility frontier is: x² + y2 s 300. She faces an environmental constraint given by x + y = 200. a) Set up the Lagrangian function. b) List all of the Kuhn-Tucker conditions. c) Interpret...
Each individual consumer takes the prices as given and chooses her consumption bundle, (r, 2) R, by maximizing the utility function U (r1, T)= In(xr2), subject to the budget constraint pi 1 + p2 2 900 (a) (3 points) Write out the Lagrangian function for the consumer's problem (b) (6 points) Write out the system of first-order conditions for the consumer's problem (e) (6 points) Solve the system of first-order conditions to find the optimal values of r and r2....
Question 1 (20 marks) (a) A consumer maximizes utility and has Bernoulli utility function u(w)/2. The consumer has initial wealth w 1000 and faces two potential losses. With probability 0.1, the consumer loses S100, and with probability 0.2, the consumer loses $50. Assume that both losses cannot occur at the same time. What is the most this consumer would be willing to pay for full insurance against these losses? (10 marks) (b) A consumer has utility function u(z, y) In(x)...
Question 1. (Consumption-Saving Problem): Suppose that a consumer lives for two periods. The utility function of the consumer is given by with u> 0 where c and c2 are consumption in period 1 and period 2 respectively. Sup- pose that consumer has income y in the first period, but has no income in the second period. Consumer has to save in the first period in order to consume in the second period. Let s be the savings in the first...
Question 1. (Consumption-Saving Problem): Suppose that a consumer lives for two periods. The utility function of the consumer is given by with u> 0 where c and c2 are consumption in period 1 and period 2 respectively. Sup- pose that consumer has income y in the first period, but has no income in the second period. Consumer has to save in the first period in order to consume in the second period. Let s be the savings in the first...
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...
S An individual has a utility function as follows subject to the budget constraint; 6r+2y 110 i) Write down the Lagrangian function for this individual. (2 marks) (6 marks) Using Cramer's rule, solve for x, y and 2. ii) Using Hessian matrix, check the second-order sufficient condition to verify that the utility of this individual is at maximum. (3 marks)
S An individual has a utility function as follows subject to the budget constraint; 6r+2y 110 i) Write down the...
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