What is a Giffen Good? Using budget lines and utility functions, graphically illustrate a Giffen good....
What
is a Giffen Good? Using budget lines and utility functions, graphically
illustrate a
Giffen good. Make sure you correctly identify the income effect and
the substitution
effect.
Homework Answers
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What
is a Giffen Good? Using budget lines and utility functions,
graphically
illustrate a
Giffen good....
labelling all axes, slopes, intercepts, etc. thank you very much 3. A Giffen good is a...
labelling all axes, slopes, intercepts, etc. thank you very
much
3. A Giffen good is a good whose demand rises as its price rises. Graphically show that it is possible for good 2 to be a Giffen good even with convex, monotone preferences. To get full credit on this problem you must do the following things: (a) (5 points) Correctly show the shift in the budget set when the price of good 2 rises b) (5 points) Correctly maximize utility...
please explain clearly Q1: Using an example of a bundle of two goods, graphically illustrate the...
please explain clearly
Q1: Using an example of a bundle of two goods, graphically illustrate the substitution effect and the income effect if the price of any one good falls.
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 ?(?,?) = ? + ?√? . 1) Derive the demand function for good X.(5 marks) 2) Is good X a normal or an inferior good? Why? ( 5 marks) 3) Suppose that initially ?? = $1 and then it falls and becomes ?? = $0.5. Also suppose that Income=$10. Calculate the substitution effect, income effect, and the price effect and show...
2. Identifying normal, inferior, and Giffen goods The green line BC, on the following graph represents...
2. Identifying normal, inferior, and Giffen goods The green line BC, on the following graph represents your initial budget constraint for good X and good Y, and point A represents the optimal consumption choice, given this choice set. Suppose the price of good X dropped by 50%. The compensated budget is parallel to BC2, representing the same tradeoff between good X and good Y, and it is tangent to the given indifference curve (U) at point B. On the following...
Anna spends all her income on wine (good 1) and cheese (good 2). Her utility function...
Anna spends all her income on wine (good 1) and cheese (good 2). Her utility function is u(x1; x2) = x1x2. Her income is m = $200. The prices for the two goods are p1 = $20 and p2 = $10 respectively. Find Annaís optimal consumption bundle. Show the complete calculations, and illustrate your answer graphically (draw the indi§erence curve and the budget constraint). How would your answer change to part (a) if Annaís utility function were given by v(x1;...
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.
Question 5 [8] 5.1. With reference to the indifference theory with good Y on the vertical axis and good X on the horizo...
Question 5 [8] 5.1. With reference to the indifference theory with good Y on the vertical axis and good X on the horizontal axis, graphically illustrate a change in consumer equilibrium due to a change in income. Remember to label the diagram correctly and to indicate the "income consumption curve clearly. 5.2. Referring to the graph above and consumer equilibrium, indicate what will happen to the budget line should there be an increase in the price of good X (on...
A consumer has the utility function U(X, Y) = (X + 2)(Y + 4). Her income is...
A consumer has the utility function U(X, Y) = (X + 2)(Y + 4). Her income is $100, the price of X is $4, and the price of Y is $5. In order to maximize utility subject to her budget constraint, how many units of X and Y will our consumer choose to purchase? Sketch a budget line – indifference curve diagram illustrating this optimum. Label this optimum A. Suppose the price of X increases to $8, while income and the price...
Question Kayla's utility depends on her consumption of good 1(Q1) and good 2 (Q2), and it...
Question Kayla's utility depends on her consumption of good 1(Q1) and good 2 (Q2), and it is described by the following utility function: U(Q), Q2 ) = 27 Q7'3 Q3 Deriving Demand functions 1. What are her uncompensated demand functions (Marshallian demand function) for Q1 and Q2? 2. What are her compensated demand functions (Hicksian demand function) for Q1 and Q2? Effects of a price increase (substitution, income, and total effects) Her income is currently $360. Consider that the price...
only letter e and f 18. Graphically illustrate the market for a good in competitive equilibrium...
only letter e and f
18. Graphically illustrate the market for a good in competitive equilibrium (be sure to label S. D, P. and O) Shade and label the areas that measure consumer surplus, producer surplus, and deadweight loss (if there is any DWL). a. Is this market efficient? Why? b. Now assume that the market price falls below the equilibrium price (NOT as a result of a change in supply or demand). Redraw your graph below and illustrate this...
labelling all axes, slopes, intercepts, etc. thank you very
much
3. A Giffen good is a good whose demand rises as its price rises. Graphically show that it is possible for good 2 to be a Giffen good even with convex, monotone preferences. To get full credit on this problem you must do the following things: (a) (5 points) Correctly show the shift in the budget set when the price of good 2 rises b) (5 points) Correctly maximize utility...
please explain clearly
Q1: Using an example of a bundle of two goods, graphically illustrate the substitution effect and the income effect if the price of any one good falls.
2. Identifying normal, inferior, and Giffen goods The green line BC, on the following graph represents your initial budget constraint for good X and good Y, and point A represents the optimal consumption choice, given this choice set. Suppose the price of good X dropped by 50%. The compensated budget is parallel to BC2, representing the same tradeoff between good X and good Y, and it is tangent to the given indifference curve (U) at point B. On the following...
Question 5 [8] 5.1. With reference to the indifference theory with good Y on the vertical axis and good X on the horizontal axis, graphically illustrate a change in consumer equilibrium due to a change in income. Remember to label the diagram correctly and to indicate the "income consumption curve clearly. 5.2. Referring to the graph above and consumer equilibrium, indicate what will happen to the budget line should there be an increase in the price of good X (on...
Question Kayla's utility depends on her consumption of good 1(Q1) and good 2 (Q2), and it is described by the following utility function: U(Q), Q2 ) = 27 Q7'3 Q3 Deriving Demand functions 1. What are her uncompensated demand functions (Marshallian demand function) for Q1 and Q2? 2. What are her compensated demand functions (Hicksian demand function) for Q1 and Q2? Effects of a price increase (substitution, income, and total effects) Her income is currently $360. Consider that the price...
only letter e and f
18. Graphically illustrate the market for a good in competitive equilibrium (be sure to label S. D, P. and O) Shade and label the areas that measure consumer surplus, producer surplus, and deadweight loss (if there is any DWL). a. Is this market efficient? Why? b. Now assume that the market price falls below the equilibrium price (NOT as a result of a change in supply or demand). Redraw your graph below and illustrate this...
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