Suppose that the preferences a typical American has for quantities of electricity (E) and gasoline (G)...
Suppose that the preferences a typical American has for quantities of electricity (E) and gasoline (G) is given by U(E,G) = a ln(E) + (1 - a) ln(G) where 0 < a < 1. Suppose the prices of gasoline and electricity in the units provided are both $1/unit and the consumer has an income of $100. Suppose in addition, the government has chosen to ration electricity by allowing a maximum consumption of 50 units of electricity (E ≤ 50)
. a. If a = .25, find the optimal consumption bundle of gasoline and electricity. Does the electricity rationing constraint have an influence on consumer's choice?
b. If a = .75, find the optimal consumption bundle of gasoline and electricity. Does the electricity rationing constraint of the government have an influence on the consumer?
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Suppose that the preferences a typical American has for
quantities of electricity (E) and gasoline (G)...
I'm having trouble figuring out the below portion of this problem. The preferences of a typical...
I'm having trouble figuring out the below portion of this
problem.
The preferences of a typical Californian can be represented by the following utility function: U(21, 22) = a ln(x1) + (1 – a) ln(x2) Here, X1 and 22 are the quantities of electricity and gasoline, respectively. The consumer faces prices given by Pi and P2 and has income m. Currently, the government has decided to impose a consumption restriction so that any person in the state is allowed to...
number 1 please Problem 2. Consider a consumer has Cobb-Douglas preferences over two goods 21 and...
number 1 please
Problem 2. Consider a consumer has Cobb-Douglas preferences over two goods 21 and 22, given by u (21, 22) = 7 ln 21 + In 22. Let pı = 5 and p2 = 3 be the prices of the two goods, and suppose the agent has income I = 20. Suppose there is rationing of goods, so that in addition to paying for goods, the agent must have the appropriate number of coupons. Suppose, the agent begins...
1. Suppose Gerte Guzzler has a daily income of $80. Gerte allocates her income between gasoline,...
1. Suppose Gerte Guzzler has a daily income of $80. Gerte allocates her income between gasoline, which she uses on her daily commute to work, and clothing, which she wears to work. The price of gasoline is $5 per unit (1 unit = 5 gallons) and the price of clothing is $2 per unit. a. How is Gerte affected by a government plan to ration gasoline to 5 units per day? Explain. Use a graph of the consumer choice model...
Cursue a consumer with preferences described by (x1, x2) = x1 + x2 Suppose she faces...
Cursue a consumer with preferences described by (x1, x2) = x1 + x2 Suppose she faces prices pi 1 and P2 = 1/2 and that she has an income of I = 2. For your reference, the marginal utilities at a bundle (x1, x2) in this setting are given by MU (x1, x2) = 1 MU?(x), x2) = 2V x2 3(a) Write down the two equations which characterize the consumer's utility-maximizing bundle (X1.3) in this situation. In other words, write...
Suppose that a consumer consumes only food(F) and entertainment(E). Suppose PF = $5, PE = $10,...
Suppose that a consumer consumes only food(F) and entertainment(E). Suppose PF = $5, PE = $10, I = $600. Suppose the utility function is u(F, E) = F E. (a) Find the optimal bundle. (b) Suppose now that the consumer has to have a minimum of 50 units of F, and a maximum of 20 units of E. Draw the new budget constraint and find the new optimal bundle.
Reagan has preferences over electricity (E) and solar power (S) represented by ?(S, E) = (?...
Reagan has preferences over electricity (E) and solar power (S) represented by ?(S, E) = (? 1 2 + ? 1 2) 2 . Her income is $120, the price of a unit of electricity is $2, and the price of a unit of solar power is $4. a. Suppose the government offers a per unit subsidy for solar power. Specifically, for every unit of solar power Reagan now buys, she receives $2.00 from the government. (This effectively lowers the...
Problem 1 Consider a consumer with the utility function U(21,22) = 10x 23 -50. Suppose the...
Problem 1 Consider a consumer with the utility function U(21,22) = 10x 23 -50. Suppose the prices of X1 and 22 are 10 and 2 respectively and the consumer has an income of 150. How did the '50' in the utility function influence the optimal con- sumption bundle? How did the '10' in the utility function influence the optimal consumption bundle? (i.e., how would the optimal bun- dle change if these coefficients were to change?). How would the optimal bundle...
3. A consumer's preferences over a and y are given by the utility function u(x,y) -...
3. A consumer's preferences over a and y are given by the utility function u(x,y) - 2vr 2/y. The individual's income is I $100. The price of a unit of good c is $2, while the price of a unit of good y is S1. a) Graphically describe: i. the consumer's preferences for r and y ii. the budget constraint (b) Find the optimal x that the consumer would choose. You may assume (c) What is the consumer's MRS at...
Consider the two-period model from Chapter 9, and assume there is one representative consumer with utility...
Consider the two-period model from Chapter 9, and assume there is one representative consumer with utility function uc,d) = Iníc) + In(d), so the time discount factor is 3 = 1. There is also a government that levies lump-sum taxes in the current and future periods. The government has expenditures of G = 580 in the current period and G' = 630 in the future period. (a) Suppose the consumer has current and future income (w.y') = (3500, 6510), and...
Suppose we want to analyze a consumer’s weekly consumption of gasoline. Let good one be “gallons...
Suppose we want to analyze a consumer’s weekly consumption of gasoline. Let good one be “gallons of gasoline” and good 2 be “dollars spent on everything else”. The consumer has a weekly income of $100 and gas is $4 a gallon. i. Graph the consumer’s budget constraint. ii. Suppose that the government makes drivers pay $0.50 a gallon in tax. Graph the new budget constraint. Is the budget set smaller or larger? iii. Suppose that the government only wants to...
I'm having trouble figuring out the below portion of this
problem.
The preferences of a typical Californian can be represented by the following utility function: U(21, 22) = a ln(x1) + (1 – a) ln(x2) Here, X1 and 22 are the quantities of electricity and gasoline, respectively. The consumer faces prices given by Pi and P2 and has income m. Currently, the government has decided to impose a consumption restriction so that any person in the state is allowed to...
number 1 please
Problem 2. Consider a consumer has Cobb-Douglas preferences over two goods 21 and 22, given by u (21, 22) = 7 ln 21 + In 22. Let pı = 5 and p2 = 3 be the prices of the two goods, and suppose the agent has income I = 20. Suppose there is rationing of goods, so that in addition to paying for goods, the agent must have the appropriate number of coupons. Suppose, the agent begins...
Cursue a consumer with preferences described by (x1, x2) = x1 + x2 Suppose she faces prices pi 1 and P2 = 1/2 and that she has an income of I = 2. For your reference, the marginal utilities at a bundle (x1, x2) in this setting are given by MU (x1, x2) = 1 MU?(x), x2) = 2V x2 3(a) Write down the two equations which characterize the consumer's utility-maximizing bundle (X1.3) in this situation. In other words, write...
Problem 1 Consider a consumer with the utility function U(21,22) = 10x 23 -50. Suppose the prices of X1 and 22 are 10 and 2 respectively and the consumer has an income of 150. How did the '50' in the utility function influence the optimal con- sumption bundle? How did the '10' in the utility function influence the optimal consumption bundle? (i.e., how would the optimal bun- dle change if these coefficients were to change?). How would the optimal bundle...
3. A consumer's preferences over a and y are given by the utility function u(x,y) - 2vr 2/y. The individual's income is I $100. The price of a unit of good c is $2, while the price of a unit of good y is S1. a) Graphically describe: i. the consumer's preferences for r and y ii. the budget constraint (b) Find the optimal x that the consumer would choose. You may assume (c) What is the consumer's MRS at...
Consider the two-period model from Chapter 9, and assume there is one representative consumer with utility function uc,d) = Iníc) + In(d), so the time discount factor is 3 = 1. There is also a government that levies lump-sum taxes in the current and future periods. The government has expenditures of G = 580 in the current period and G' = 630 in the future period. (a) Suppose the consumer has current and future income (w.y') = (3500, 6510), and...
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