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Consider a fall in the price of X in the standard two-good consumer model. Prove that...
1) Good X is elastic. Good Y is a substitute. You are considering increasing Px. Will your revenue rise or fall? Answer: the total revenue (joint TR for X and Y) will (pick one: rise, fall, remain the same, or ambiguous) because ... 2) Good X is elastic. Good Y is a substitute. You are considering decreasing Px. Will your revenue rise or fall? Answer: the total revenue (joint TR for X and Y) will (pick one: rise, fall, remain...
1) Good X is elastic. Good Y is a substitute. You are considering increasing Px. Will your revenue rise or fall? Answer: the total revenue (joint TR for X and Y) will (pick one: rise, fall, remain the same, or ambiguous) because ... 2) Good X is elastic. Good Y is a substitute. You are considering decreasing Px. Will your revenue rise or fall? Answer: the total revenue (joint TR for X and Y) will (pick one: rise, fall, remain...
Suppose the demand for good X is given by Xdx=20-Px+2Py+M. The price of good X is $5, the price of good Y is $15, and the income is $150. How much of good X will be purchased? Is good Y a substitute or complement of good X? Is good X a normal good or an inferior good?
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.
Qd=680-9Px-6I+4Py where Qd=quantity of good X demanded, Px=price of good X, I=Income, and Py=price of related good Y. From the demand function, it is apparent that good X is: I. a normal good II. an inferior good III. a substitute for good Y IV. a complement with good Y a. II only b. both I and III c. both I and IV d. both II and III e. both II and IV
1. Suppose a consumer has the utility function over goods x and y u(x,y) = 3x{y} (a) Setup the utility maximization problem for this consumer using the general budget con- straint. (2 points) (b) Will the constraint be active/binding? Is the sufficient condition for interior solution satisfied? Prove your answers. (4 points) (c) Solve the utility maximization problem for the Marshallian demand equations x* (Px. Py,m) and y* (Px.p.m). Show all of your work and circle your final answers. (7...
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...
The demand for good X is given by QXd = 6,000 - (1/2)PX - PY + 9PZ + (1/10)M Research shows that the prices of related goods are given by Py = $6,500 and Pz = $100, while the average income of individuals consuming this product is M = $70,000. a. Indicate whether goods Y and Z are substitutes or complements for good X. Good Y is: (Click to select) a substitute neither complement nor substitute a complement . Good Z is: (Click to select) a complement a...
1. Suppose a consumer has the utility function over goods x and y u(x, y) = 3x}}} (a) Setup the utility maximization problem for this consumer using the general budget con- straint. (2 points) (b) Will the constraint be active/binding? Is the sufficient condition for interior solution satisfied? Prove your answers. (4 points) (c) Solve the utility maximization problem for the Marshallian demand equations x (Px, py,m) and y* (Px, Py,m). Show all of your work and circle your final...
Question 2 (20 points) A consumer purchases two goods x ano y. The consumer's income is 1. Hi S income is 1. His utility is given by is * and y. Px is the price of x. Py is the price of a) Calculate consumer's optim U(x,y) = xy s optimal choice of x and y under his budget.hu uncompensated demand) b) Derive the indirect utility function. c) Are these two goods normal goods? Why d) Derive the expenditure function....