Assume that Julie has preferences that satisfy the 3 axioms of choice and monotonicity. Further, assume...
Assume that Julie has preferences that satisfy the 3 axioms of choice and monotonicity. Further, assume that her preferences are convex. Consider the following three bundles of Pokemon Cards (C) and Hot Cheetos (H):
(a) C: 3, H: 4
(b) C: 8, H: 2
(c) C: 6, H: 3
Can you say that Julie prefers bundle (c) to (a) and (b)? Why or why not?
Homework Answers
No, julie may or may not prefer bundle c over a and b because one bundle will definitely preferred over other only when quantity of both goods are more which is monotonicity which says more is preferred over less. Unless we are not given a utility functions we can't say which bundle is preferred over others
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Assume that Julie has preferences that satisfy the 3 axioms of
choice and monotonicity. Further, assume...
1) Consider a consumer who is choosing among combinations of two goods: cookies (c) and donuts...
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3. Indifference curves and preferences Alex likes both soda and milk. Assume that the "more is...
3. Indifference curves and preferences Alex likes both soda and milk. Assume that the "more is better" principle applies to Alex; that is, he would always prefer to consume more of either good, holding the consumption of the other good constant. The points on Figure 1 represent combinations of milk and soda that Alex might choose to consume. Figure 2 shows the same points as Figure 1, but it also shows some of Alex's indifference curves: 11, 12, and 13...
3. Indifference curves and preferences Edison likes both chocolate and ice cream. Assume that the more...
3. Indifference curves and preferences Edison likes both chocolate and ice cream. Assume that the more is better" principle applies to Edison; that is, he would always prefer to consume more of either good, holding the consumption of the other good constant. The points on Figure 1 represent combinations of ice cream and chocolate that Edison might choose to consume. Figure 2 shows the same points as Figure 1, but it also shows some of Edison's indifference curves: 11, 12,...
Problem 2 Suppose that Prof. Wu faces three consumption bundles A-1 apples,3 bananas), . B (3...
Problem 2 Suppose that Prof. Wu faces three consumption bundles A-1 apples,3 bananas), . B (3 apple, 2 bananas), . C (4 apples, 2 bananas) Assume that Prof. Wu prefers C to B and he is indifferent between Λ and B 1) If Prof. Wu is rational, what additional conditions you need to impose on Prof. Wu's pref erences? Explain why after adding those conditions, we can say Prof. Wu is rational 2) Depict the three consumption bundles on a...
1. Sally has preferences represented by the utility function UC, M) = 3 + 61rC M, where C is coffee and M is meals....
1. Sally has preferences represented by the utility function UC, M) = 3 + 61rC M, where C is coffee and M is meals. Her income is S100, and she pays $2 per coffee and S10 per meal a. Distinguish (the concepts of) diminishing marginal rate of substitution from diminishing marginal uty Your answer does not have to be specific to Sally's preferences. (4 points) Use the Lagrangian method to derive Sally's utility maximizing bundle given her budget constraint. Circle...
3. Craig likes both apples and bananas. He consumes nothing else. The consumption bundle where Craig...
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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...
Risk preferences Sharon Smith, the financial manager for Barnett Corporation, wishes to select one of three...
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Problem 5 Sam has preferences over green eggs, g, and ham, h, that can be described...
Problem 5 Sam has preferences over green eggs, g, and ham, h, that can be described by u(g, h) = 3g2/3 + h. The price of green eggs is Pg and the price of ham is Ph, and Sam has Y dollars to spend. (a) Solve for Sam's demand functions for both green eggs and ham. (b) Give an (numerical) example of prices and income (Pg, Pn, Y) such that Sam's optimal bundle is an interior solution. (c) Give an...
Fit to page Page view A Re 2. Basket A contains 5 apples and 1 orange....
Fit to page Page view A Re 2. Basket A contains 5 apples and 1 orange. Basket B contains 1 apple and 5 oranges. Basket C contains 3 apples and 3 oranges. Assume throughout that tastes are monotonic. On Monday, Anne is offered a choice between basket A and C, and she chooses A. On Tuesday, she is offered a choice between basket B and C, and she chooses B. a) Graph these baskets on a graph with apples on...
1) Consider a consumer who is choosing among combinations of two goods: cookies (c) and donuts (d). A bundle of c cookies and d donuts is given by (c, d). Assume that both c and d can take values 0,1,2, or 3. The consumer's preferences over bundles of cookies and donuts are as follows: For any two bundles (c,d) and (c,d'): (c,d) (e,d') whenever c2c and d 2 d To understand how to use this definition, consider two bundles (c,...
3. Indifference curves and preferences Alex likes both soda and milk. Assume that the "more is better" principle applies to Alex; that is, he would always prefer to consume more of either good, holding the consumption of the other good constant. The points on Figure 1 represent combinations of milk and soda that Alex might choose to consume. Figure 2 shows the same points as Figure 1, but it also shows some of Alex's indifference curves: 11, 12, and 13...
3. Indifference curves and preferences Edison likes both chocolate and ice cream. Assume that the more is better" principle applies to Edison; that is, he would always prefer to consume more of either good, holding the consumption of the other good constant. The points on Figure 1 represent combinations of ice cream and chocolate that Edison might choose to consume. Figure 2 shows the same points as Figure 1, but it also shows some of Edison's indifference curves: 11, 12,...
Problem 2 Suppose that Prof. Wu faces three consumption bundles A-1 apples,3 bananas), . B (3 apple, 2 bananas), . C (4 apples, 2 bananas) Assume that Prof. Wu prefers C to B and he is indifferent between Λ and B 1) If Prof. Wu is rational, what additional conditions you need to impose on Prof. Wu's pref erences? Explain why after adding those conditions, we can say Prof. Wu is rational 2) Depict the three consumption bundles on a...
1. Sally has preferences represented by the utility function UC, M) = 3 + 61rC M, where C is coffee and M is meals. Her income is S100, and she pays $2 per coffee and S10 per meal a. Distinguish (the concepts of) diminishing marginal rate of substitution from diminishing marginal uty Your answer does not have to be specific to Sally's preferences. (4 points) Use the Lagrangian method to derive Sally's utility maximizing bundle given her budget constraint. Circle...
3. Craig likes both apples and bananas. He consumes nothing else. The consumption bundle where Craig consumes x, bushels of apples per year and Xg bushels of bananas per year is written as (X4, Xg). Last year, Craig consumed 20 bushels of apples and 5 bushels of bananas. It happens that the set of consumption bundles (XA, Xg) such that Craig is indifferent between (XA, Xg) and 0,5) is the set of all bundles such that Xg = 100/XA. The...
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...
Risk preferences Sharon Smith, the financial manager for Barnett Corporation, wishes to select one of three prospective investments X. Y, and Z. Assume that the meąsure of risk Sharon cares about is an assets standard deviation. The expected returms and standard deviations of the investments are as follows E a. If Sharon were risk neutral, which investment would she select? Explain why b. If she were risk averse, which investment would she select? Why? c. if she were risk seeking,...
Problem 5 Sam has preferences over green eggs, g, and ham, h, that can be described by u(g, h) = 3g2/3 + h. The price of green eggs is Pg and the price of ham is Ph, and Sam has Y dollars to spend. (a) Solve for Sam's demand functions for both green eggs and ham. (b) Give an (numerical) example of prices and income (Pg, Pn, Y) such that Sam's optimal bundle is an interior solution. (c) Give an...
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