If the price ratio changes (Px/Py) due to a decrease in the price of X while...
If the price ratio changes (Px/Py) due to a decrease in the price of X while income remains constant, the vertical intercept (Y) of the budget line ____________ and the horizontal intercept (X) rotates (pivots) ____________. a. remains the same; out b. remains the same; in c. moves up; out d. moves down; in
Homework Answers
As only the price of the good X has decreased the consumer will consume more X same amount of Y, this will make the budget line remain the same on Y axis and move out on the X asix.
The answer is "A".
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If the price ratio changes (Px/Py) due to a decrease in the
price of X while...
Given a utility function U(x,y) = xy. The price of x is Px, while the price of y is Py. The income is I. Suppose at period 0, Px = Py = $1 and income = $8. At period 1, price of x (Px) is changed to $4. Compute the price effect, substitution effect, and
Given a utility function U(x,y) = xy. The price of x is Px, while the price of y is Py. The income is I. Suppose at period 0, Px = Py = $1 and income = $8. At period 1, price of x (Px) is changed to $4. Compute the price effect, substitution effect, and income effect for good x from the price change.
4. A group of economists has carefully estimated demand for electric cars as follows: x(px, py,...
4. A group of economists has carefully estimated demand for electric cars as follows: x(px, py, m)-8m +4py-px; x represents electric cars, m is income, and y represents gas-powered cars. Suppose that m=2 and py-2. (a) What is the inverse demand function for electric cars? (b) If m increases to 3 and py remains constant, what is the new inverse demand function? (c) Draw both the inverse demand functions (x horizontal and px vertical axis).
3. (3 Points) Intuitively describe what the slope of the budget line tells us about the...
3. (3 Points) Intuitively describe what the slope of the budget line tells us about the consumer's ability to trade goods X and Y. 4. (6 Points) For each description of a change in the budget line given below, state which of the following increases or decreases for the budget constraint variables would cause it: † Px + PxPy. Pytw, and I W. (a) The budget line rotates inward around its horizontal intercept (meaning that it's horizontal intercept does NOT...
Suppose Qxd = 10,000 - 2 Px + 3 Py - 4.5M, where Px = $100,...
Suppose Qxd = 10,000 - 2 Px + 3 Py - 4.5M, where Px = $100, Py = $50, and M = $2,000. (Note that Qdx is the quantity demanded of Good X, Px is the price of Good X, Py is the price of another product called Good Y, and M stands for income available.) Use this information to answer the following three parts of question 6. a. For this demand equation, what is the P intercept? b. For...
2. Suppose that Peggy’s marginal rate of substitution of two goods (MRSXY) is greater than the...
2. Suppose that Peggy’s marginal rate of substitution of two goods (MRSXY) is greater than the relative price ratio (Px/Py) in absolute value. Assuming that a diagram of Peggy’s budget constraint reflects the quantities of good Y measured on the vertical axis and quantities of good X measured on the horizontal axis, she will Buy more of good Y and move down the budget line Buy more of good Y and move up the budget line Buy more of good...
A) Suppose U = min[X, 3Y] and I=12, Px=1 and Py=5. Find X* and Y*. B) Draw an indifference curve and a normal linear budget constraint such that there is a tangency point (where MRS= price ratio) that...
A) Suppose U = min[X, 3Y] and I=12, Px=1 and Py=5. Find X* and Y*. B) Draw an indifference curve and a normal linear budget constraint such that there is a tangency point (where MRS= price ratio) that is not the optimal bundle. C) Suppose U=X∙Y5. Find X* and Y*. D) Suppose U = 5∙X + 2∙Y and I=12, Px=2 and Py=1. Find X* and Y*.
A) Suppose U = min[X, 3Y] and I=12, Px=1 and Py=5. Find X* and Y*. B)...
A) Suppose U = min[X, 3Y] and I=12, Px=1 and Py=5. Find X* and Y*. B) Draw an indifference curve and a normal linear budget constraint such that there is a tangency point (where MRS= price ratio) that is not the optimal bundle. C) Suppose U=X∙Y5. Find X* and Y*. D) Suppose U = 5∙X + 2∙Y and I=12, Px=2 and Py=1. Find X* and Y*.
QD=8000-2P2 +0.4 I-2 PY +SP2 QD = Quantity demanded of good & PX = Price of...
QD=8000-2P2 +0.4 I-2 PY +SP2 QD = Quantity demanded of good & PX = Price of good x I= consumer of Income (In thousands) PY= Price of good Y P2= Price of good 2 1) what are the you don't need Price intercept intercepts and slope of your demaner curve? to draw the demand curve. Just indicate the and the quantity intercep and slope. 2) If the price of good x is $100, what is quantity demanded 3) suppose price...
Consider a consumer whose income is 100 and his preference is given by U-10x04yo6. If PX-Py-1,...
Consider a consumer whose income is 100 and his preference is given by U-10x04yo6. If PX-Py-1, what is the optimal consumption bundle by the consumer? (Please write out the constraint utility maximization problem completely, including the budget function.) Derive the demand of Good X and Y by this consumer. (The result should be a function giving you the amount of X he will buy at every given price level Px, and a function for good Y as well.) a. b....
A) Suppose U = ln(x)+y and Px=2, and Py=4. Write down the expenditure minimizing lagrangian for...
A) Suppose U = ln(x)+y and Px=2, and Py=4. Write down the expenditure minimizing lagrangian for this problem. (you don’t need to solve it) B) You have $8 which you can spend on X or Y. The price of Y is always $1 but the price of X is $1 for the first 2 and $2 after that. Draw the budget constraint (make sure to label the graph with all of the relevant information). C) Suppose U = min[2X, 3Y]...
4. A group of economists has carefully estimated demand for electric cars as follows: x(px, py, m)-8m +4py-px; x represents electric cars, m is income, and y represents gas-powered cars. Suppose that m=2 and py-2. (a) What is the inverse demand function for electric cars? (b) If m increases to 3 and py remains constant, what is the new inverse demand function? (c) Draw both the inverse demand functions (x horizontal and px vertical axis).
3. (3 Points) Intuitively describe what the slope of the budget line tells us about the consumer's ability to trade goods X and Y. 4. (6 Points) For each description of a change in the budget line given below, state which of the following increases or decreases for the budget constraint variables would cause it: † Px + PxPy. Pytw, and I W. (a) The budget line rotates inward around its horizontal intercept (meaning that it's horizontal intercept does NOT...
QD=8000-2P2 +0.4 I-2 PY +SP2 QD = Quantity demanded of good & PX = Price of good x I= consumer of Income (In thousands) PY= Price of good Y P2= Price of good 2 1) what are the you don't need Price intercept intercepts and slope of your demaner curve? to draw the demand curve. Just indicate the and the quantity intercep and slope. 2) If the price of good x is $100, what is quantity demanded 3) suppose price...
Consider a consumer whose income is 100 and his preference is given by U-10x04yo6. If PX-Py-1, what is the optimal consumption bundle by the consumer? (Please write out the constraint utility maximization problem completely, including the budget function.) Derive the demand of Good X and Y by this consumer. (The result should be a function giving you the amount of X he will buy at every given price level Px, and a function for good Y as well.) a. b....
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