Aaron consumes only 2 goods: avocados (a) and bread (b). His utility function is U(a,b)=ab, with MUa=b and MUb=a. The price of avocados is $4 and Aaron’s income is $24. He spends his entire income on his current consumption bundle of two avocados and eight loaves of bread.
a) What is the price of a loaf of bread?
Aaron consumes only 2 goods: avocados (a) and bread (b). His utility function is U(a,b)=ab, with...
4. Malachi only consumes 2 goods: DVD rentals and coffee. His utility function is U(RC)-Rº4CO6 where R is the number of DVD rentals and C is cups of coffee. Malachi has $30 in his pocket right now, and he plans to spend all of the money on rentals and coffee today. a. The price of one rental is $3 and the price of one cup of coffee is $2 per cup. Solve for the optimal bundle. b. Suppose that Malachi...
4. Malachi only consumes 2 goods: DVD rentals and coffee. His utility function is U(R,C)=R0.4C0.6 where R is the number of DVD rentals and C is cups of coffee. Malachi has $30 in his pocket right now, and he plans to spend all of the money on rentals and coffee today. a. The price of one rental is $3 and the price of one cup of coffee is $2 per cup. Solve for the optimal bundle. b. Suppose that Malachi...
5. A peasant has utility U(B,C) 4VB C over bread B and flourless cake C, with marginal utilities MUB -2/VB 5.d U (95),Wtnette isend,ipy oLi1s and MUc-1. Prices are pB-2 and pc-3, and his income is 1 = 33, First, double-check that he initially consumes (B, C) (9,5), with utility U 17, and illustrate on a budget/indifference curve diagram. Next, benevolent monarch Marie Antoinette learns that carbs are evil. She wants to discourage bread consumption without making the peasant worse-off....
Malachi only consumes 2 goods: DVD rentals and coffee. His utility function is where is the number of rentals and is cups of coffee. Malachi has $16 in his pocket right now, and he plans to spend all of the $16 on DVD rentals and coffee today. b) Suppose that Malachi signs up for a membership that reduces the price of a rental to $2, while leaving his income unchanged. Find the substitution effect, income effect and total effect of...
1. Harvey Habit's utility function is U (C1, C2) = min {c1, c2}, where cı is his consumption of bread in period 1 and c2 is his consumption of bread in period 2. The price of bread is $1 per loaf in period 1. The interest rate is 21%. Harvey earns $2,000 in period 1 and he will earn $1,100 in period 2. (a) Write Harvey's budget constraint in terms of future value. (b) How much bread does Harvey consume...
Caleb consumes only two goods, X and Y, and faces the following utility function: U=XY. His initial budget is $800, and the prices of X and Y are $12.5 and $2. What is the marginal utility for X? What is the marginal utility for Y? **Most answers should be round numbers. Answer everything to 1 decimal place, if need be** What are the amounts of X and Y that will maximize Caleb's utility? X = Y = How many X...
Arlo is very health-conscious and consumes only two goods, rice cakes and quinoa. His utility function is ?(?,?)=?2?u(r,q)=r2q, where ?r is the number of packs of rice cakes he consumes and ?q is ounces of quinoa. The price of a pack of rice cakes is $4, and the price of an ounce of quinoa is $8. Arlo has $720 to spend this week on these two goods. Suppose that the price of quinoa suddenly falls to $4. A)Before the price...
18. Suppose that Maggie cares only about chai and bagels. Her utility function is U(C,B) C 0.8B 0.2, where C is the number of cups of chai she drinks in a week, and B is the number of bagels she eats in a week. The price of chai is $2, and the price of bagels is S1. Maggie has S300 to spend per week on chai and bagels. a. What is Maggie's utility-maximizing bundle of chai and bagels? Use the...
6. A Wisconsin resident Sarah only consumes two goods: Bananas (B) and Apples (A). Her utility is given by the formula: U AB You are also told that Sarah's marginal utility for consuming bananas and her marginal utility from consuming applies are given by the following equations: Marginal Utility for Bananas: MUB A Marginal Utility for Apples: MUA B a) Given this information and holding everything else constant, fill out all the missing information in the table below. Utility 100...
Assume John has Cobb-Douglas utility function for bread (B) and whiskey (W): U= 2 BSWS Marginal utilities are as followed: MUB=B-05W. and MUw = 30.5W-0.5 a. Write down the expression for MRSow (i.e., you need to simplify the ratio and come up with a neat result) b. What is MRSBw at bundle A(4,4)? At bundle B(1,16)? C. Regarding MRSBw, we consider a movement along an indifference curve from the left to the righ (getting more of bread, the good on...