ZuoTi.Pro
Question

microeconomics

Consumers in Georgia pay twice as much for avocados as they do for peaches. However, avocados and peaches are equally priced in California. If consumers in both states maximize utility, will the marginal rate of substitution of peaches for avocados be the same for consumers in both states? If not, which will be higher??

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

Homework Answers

Answer #1

Marginal rate of substitution of peach for avocado is the rate at which a customer is ready to give up avocado for an additional amount of peach, while retaining same utility.

Given-

In Georgia,

In California,

At maximum utility point marginal rate of substitution (MRS) is equal to price ratio. In other words

In Georgia,

In California,

Marginal rate of substitution is different in both the states. The marginal rate of substitution in California is higher than in Georgia.

1 0
Add a comment
Know the answer?
Add Answer to:
microeconomics
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

  • Instructions: Answer the following questions as completely as possible. Write your answer neatly and legibly. When...

    Instructions: Answer the following questions as completely as possible. Write your answer neatly and legibly. When drawing a graph, make sure that you label axes and curves, and include appropriate coordinates. Always show your work. Suppose that Bridget and Erin spend their incomes on two goods, food (F) and clothing (C). Bridget’s preferences are represented by the utility function U(F,C) = 10FC, while Erin’s preferences are represented by the utility function U ( F , C ) = 0.20 F^2...

  • Microeconomics: 1. There are two kinds of goods, food F and shelter S, which are only...

    Microeconomics: 1. There are two kinds of goods, food F and shelter S, which are only available in non-negative quantities. Ann's utility from consuming bundle (F, S) is given by the function U(F, S) = F0.690.2. Bob's utility from consuming bundle (F, S) is given by the function V(F, S) = F0.75 0.25 PF (a) (Time: 1 minute) What is Ann's utility level from bundle (F1, Si) = (1.1)? What about Bob's utility level? What is Ann's utility level from...

  • 1. In the leisure-income model, the wage constraint shows a. the points that maximize a worker’s...

    1. In the leisure-income model, the wage constraint shows a. the points that maximize a worker’s utility b. all points that are equally preferred c. the wage rates that affect work decisions d. the available combinations of leisure and income 2. The slope of a wage constraint reflects the: a. rate at which a person is willing to substitute leisure for income b. price of leisure c. income effect d. substitution effect 3. When a worker maximizes her utility, then...

  • B 1. Suppose that a 20 percent increase in the price of normal good Y causes...

    B 1. Suppose that a 20 percent increase in the price of normal good Y causes a 10 percent decline in the quantity demanded of normal good X. The coefficient of cross elasticity of demand is: A. negative and therefore these goods are substitutes. 10 B. negative and therefore these goods are complements. C. positive and therefore these goods are substitutes. D. positive and therefore these goods are complements. 2. To maximize utility a consumer should allocate money income so...

  • The budget line A. Represents the set of all baskets that give the consumer the same...

    The budget line A. Represents the set of all baskets that give the consumer the same level of utility while holdi spending constant B. Represents the set of all baskets the consumer can afford C. Represents the set of all baskets in which the consumer purchases only one of the goods. D. Represents the set of all baskets the consumer can afford while spending all available inconm QUESTION 2 Marginal utility A. Is the ratio of total utility to total...

  • Labor Economics 1. In the leisure-income model, the wage constraint shows a. the points that maximize...

    Labor Economics 1. In the leisure-income model, the wage constraint shows a. the points that maximize a worker's utility b. all points that are equally preferred c. the wage rates that affect work decisions d. the available combinations of leisure and income 2. The slope of a wage constraint reflects the: a. rate at which a person is willing to substitute leisure for income c. income effect b. price of leisure d. substitution effect 3. When a worker maximizes her...

  • Suppose a young wine connoisseur enjoys two vintages in particular: a 2001 French Bordeaux (wf) and...

    Suppose a young wine connoisseur enjoys two vintages in particular: a 2001 French Bordeaux (wf) and 2005 California varietal wine (). Her utility function is: Let Pc represent the price of the California wine and P represent the price of the french wine. Also let I be the income of the consumer In general, the combination of French wine and Californian wine that maximizes this consumers utility is w and w* Suppose the young connoisseur has $600 to spend to...

  • 1. Consider the following two period consumption savings problem. A consumer cares about consumption (c and...

    1. Consider the following two period consumption savings problem. A consumer cares about consumption (c and future consumption c according to Assume that U(c) is given by for some constant y. In the present the consumer chooses how much to consume and how much to save out of her income y>0 This decision is made in the knowledge that in the future she will be retired, have no income, and thus future consumption will be entirely out of savings: c)a,...

  • Suppose an individual’s utility function is u=x11/2, x21/2. Let p1=4, p2=5, and income equal $200. With...

    Suppose an individual’s utility function is u=x11/2, x21/2. Let p1=4, p2=5, and income equal $200. With a general equation and general prices, derive the equal marginal principle. Graphically illustrate equilibrium and disequilibrium conditions and how consumers can reallocate their consumption to maximize utility. What is the optimal amount of x1 consumed? What is the optimal amount of x2 consumed? What is the marginal rate of substitution at the optimal amounts of x1 and x2? As functions of p1, p2, and...

  • 4.The media often claims that high-income Canadians pay the same or lower taxes than low-income Canadians....

    4.The media often claims that high-income Canadians pay the same or lower taxes than low-income Canadians. Is this a valid claim? Why or why not? Compare a Canadian earning $40,000 per year with a Canadian earning$80,000 per year. Would the higher-income Canadian pay the same amount of tax? Twice as much tax? Or more than twice as much tax? Explain. Explain why marginal tax rates in Canada are higher than average tax rates. Use the personal opinion to answer，thanks.

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