Question

A basket of goods for a given consumer includes two goods, X and Z. Consumer income is equal to $1,000 and the prices of thesWhat is the rate of inflation? % (Enter your response as a percentage rounded to two decimal places.) Given this change in pr

0 0
Add a comment Improve this question Transcribed image text
Answer #1

In the given problem ------

Px=20$

Py=50$

Income= 1000$

As consumer consumes 10 units of good X, the quantity of good Y will be 16 units .

So ,existing consumption bundle of X&Y is 10 & 16

Now ,if Px decreases by 10% and Py increases by 10%------

Px= 18$,Py=55$

18×10+55×16=1060

The income level required to maintain same bundle =$1060

*RaTe of inflation is 6%{ ( 1060-1000)/1000}×100}

*No, the consumer can not afford same bundle of goods with the original income level ,with new prices.

Add a comment
Know the answer?
Add Answer to:
A basket of goods for a given consumer includes two goods, X and Z. Consumer income...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

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
  • For the below questions, consider a consumer that consumes two goods, x and z with the...

    For the below questions, consider a consumer that consumes two goods, x and z with the following utility function. U with bar on top equals x to the power of 0.25 end exponent z to the power of 0.75 end exponent. Suppose initial values for income and the prices of goods x and z are y = 100, Px =5 , and pz=15 respectively, then the price of good x falls to px=2 . What is the magnitude of the...

  • A consumer earns SEK 24 per week and can buy two goods in quantities measured in...

    A consumer earns SEK 24 per week and can buy two goods in quantities measured in x and y respectively. One week the prices are (Px, Py) = (SEK 4, SEK 2) and our consumer buys a “shopping basket” consisting of (x1, y1) = (5, 2). Next week prices have changed to (P¯ x, P¯ y) = (SEK 3, SEK 3). Then the consumer chooses a “shopping basket” consisting of (x2, y2) = (2, 6). Are consumer preferences consistent

  • (38pts) Suppose a consumer spends all of her income on only two goods, z and y. Her preferences o...

    (38pts) Suppose a consumer spends all of her income on only two goods, z and y. Her preferences over these two goods are represented by the utility function u(r,y) min(, 4y). The price of good y is given to be S8. Her income and price of z are represented by m and ps, respectively. (a) (10 pts) Find the demand for good z as a function of m and pa. (b) (5 pts) Is good z ordinary or Giffen good?...

  • Suppose there are two consumers, A and B, and two goods, X and Y. Consumer A...

    Suppose there are two consumers, A and B, and two goods, X and Y. Consumer A is given an initial endowment of 3 units of good X and 5 units of good Y. Consumer B is given an initial endowment of 5 units of good X and 3 units of good Y. Consumer A’s utility function is given by: UA(X,Y) = X + 4Y, and consumer B’s utility function is given by UB(X,Y) = MIN (X, 2Y). If the prices...

  • Consider the following utility function of 3 goods, x, y and z: U(x,y,z)=ax+by+cz; x,y,z≥0 and a,...

    Consider the following utility function of 3 goods, x, y and z: U(x,y,z)=ax+by+cz; x,y,z≥0 and a, b, c are constants. The prices of good x and y is denoted by pX and pY respectively. The income is denoted by m. Good z is provided by the government free of cost but the quantity of good z provided by the government depends on the consumption of good x and y chosen by the consumer. For example, if in equilibrium, the consumer...

  • Question: Consider a consumer with utility function4, income Z, and who faces market prices of p,...

    Question: Consider a consumer with utility function4, income Z, and who faces market prices of p, and py (a) Use our optimality condition of MRSy MRTay to find the relationship between x and y which must always be satisfied by a bundle that maximizes the consumer's utility (b) After incorporating the consumer's budget to the problem, calculate the consumer's de- mand for x and y which we will call x(P Z) and y(Py, Z), respectively, because it empha- sizes the...

  • 3) (4pts. Consider a consumer who spends all his income on two goods, say 804 that...

    3) (4pts. Consider a consumer who spends all his income on two goods, say 804 that good 1 is an inferior good at the current prices and income). If the price and also the income of the consumer doubles, how does his demand for good at all. Explain. all his income on two goods, say good 1 and good 2. Assume ces and income). If the price of both goods double w does his demand for good 1 change, if...

  • need help with exercise 2 and can i have feedback on exercise 1 Exercisel: A consumer...

    need help with exercise 2 and can i have feedback on exercise 1 Exercisel: A consumer must spend all of her income on two goods (X and Y) 1. Suppose the market rate of substitution is 3/4 and the consumer income is $100. If the price of good X increased from 6 to 12, what would be the new market rate of substitution? PX - 3=8 Py=8 Px:=12 = P = 10 / 2 = 3/2 2. Suppose the market...

  • A consumer spends all of her income​ (Y) on two goods Z and B. The price...

    A consumer spends all of her income​ (Y) on two goods Z and B. The price of good B ​(PB​) is ​$6. The Marginal Rate of Transformation MRT is equal to minus2. That is 2 units of good B can be traded for 1 unit of good Z. This consumer is able to buy 15 units of good Z and 0 units of good B with​ his/her income. What is this​ consumer's level of​ income? The​ consumer's income is ​$...

  • A consumer buys two goods, good X and a composite good Y. The utility function is...

    A consumer buys two goods, good X and a composite good Y. The utility function is given as U(X, Y) = 2X1/2+Y. The demand function for good X is X = (Py/Px)2. (Edit: The price of X is Px, the price of Y is Py.) Suppose that initially Px=$0.5 and then it falls and becomes Px=$0.2 Calculate the substitution effect, income effect, and the price effect and show the answer graphically.

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