DeFine/Describe 1. CES utility function 2. CES utility and elasticity (or inelasticity) of demand for consumption
DeFine/Describe
1. CES utility function
2. CES utility and elasticity (or inelasticity) of demand for consumption
Homework Answers
1):-Constant Elasticity of Substitution (CES) utility functions
contain perfect substitutes, perfect complements, and cobb-douglas tastes.
It is property of some production function and utility function. Mostly it is arise in specific type of aggregate functions. In which two Or more type of consumption good are combined or two or more production input of aggregate quantity are combined.
Add Answer to:
DeFine/Describe
1. CES utility function
2. CES utility and elasticity (or inelasticity) of demand for
consumption
1 Elasticity 2. What is special about the elasticity of a Cobb-Douglas utility function? 3. Assume...
1 Elasticity 2. What is special about the elasticity of a Cobb-Douglas utility function? 3. Assume a linear demand curve. Why is the consumer's expenditure maximized where ε = -1?
3. The following utility function is known as CES (constant elasticity of substi- tution) function where...
3. The following utility function is known as CES (constant elasticity of substi- tution) function where α > 0 β > 0 (a) Is this function homothetic? (b) How does the MRS,y depend on the ratio x/y? Specifically, show that the MRSy is strictly decreasing in the ratio x/y for all values δ < 1, increasing in the ratio x/y for all values δ > 1 and constant for δ 1. (c) Show that if x = y, the MRS...
1. Define Demand Elasticity: 2. Define Elas
1. Define Demand Elasticity: 2. Define Elastic Demand and give a product example: 3. Define Inelastic Demand and give a product example: 4. Typically when the price of a product falls the Total Revenue (TR) for the company making the product will: increase/decrease (circle one) if the product has an elastic demand and increase/decrease (circle one) if the product has an inelastic demand.
A consumer uses his income I for the consumption of two goods ?1 and ?2. He maximises utility at given product prices ?1...
A consumer uses his income I for the consumption of two goods ?1 and ?2. He maximises utility at given product prices ?1, ?2. His preferences with respect to both products can be described by an ordinal utility function ?(?1,?2), which exhibits a decreasing marginal rate of substitution (normal preferences). Please indicate whether the following statements are right or wrong in this context. If a statement is wrong, then describe briefly what is wrong (one sentence). a) A double value...
Define the price of elasticity of demand and the income elasticity of demand.
Define the price of elasticity of demand and the income elasticity of demand.
Derive the income elasticity of demand using the demand functions for the case of CES, when...
Derive the income elasticity of demand using the demand functions for the case of CES, when q1= (yp1^(theta))/((p1^(theta+1))+(p2^(theta+1)) where p doesn't equal 0 and is greater than one. Theta represents 1/(1-p)
9. Define elasticity of demand. Suppose, the demand function is Qd = 180 – 2P and...
9. Define elasticity of demand. Suppose, the demand function is Qd = 180 – 2P and supply function is Qs = 5+0.5P. Calculate the price elasticity of demand and supply. Calculate also consumer’s surplus and producer’s surplus. 14. Refer to question no. 9. If the government arbitrarily set the price $80, calculate fictional gain or loss of the industry. Calculate also the deadweight loss, consumer’s surplus and producer’s surplus. 15. Refer to question no. 9. If the government arbitrarily set...
h. U(1, 2 For the utility function above, find the consumer's optimal consumption bundle when prices...
h. U(1, 2 For the utility function above, find the consumer's optimal consumption bundle when prices of goods 1 and 2 are pl and p2, and the consumer has an income m. 1. 2. For the utility function above, find the consumer's optimal consumption bundle when prices of goods 1 and 2 are pl and p2, and the consumer has an endowment (el, e2) of the two goods. For each of your answers in question 2, write down the consumer...
Define elasticity of demand and discuss the factors that affect elasticity Discuss the concept of AIDA...
Define elasticity of demand and discuss the factors that affect elasticity Discuss the concept of AIDA and its relevance for marketers. Describe each stage of the product life cycle give an example for each
Suppose a person has a utility function given by U = [xρ + yρ]1/ρ where r...
Suppose a person has a utility function given by U = [xρ + yρ]1/ρ where r is a number between −∞ and 1. This is called a constant elasticity of substitution (CES) utility function. You will encounter CES functions in Chapter 6, where the concept of elasticity of substitution will be explained. The marginal utilities for this utility function are given by MUx=[xρ+yρ]1ρ−1xρ−1 MUy=[xρ+yρ]1ρ−1yρ−1 Does this utility function exhibit the property of diminishing MRSx,y?
1 Elasticity 2. What is special about the elasticity of a Cobb-Douglas utility function? 3. Assume a linear demand curve. Why is the consumer's expenditure maximized where ε = -1?
3. The following utility function is known as CES (constant elasticity of substi- tution) function where α > 0 β > 0 (a) Is this function homothetic? (b) How does the MRS,y depend on the ratio x/y? Specifically, show that the MRSy is strictly decreasing in the ratio x/y for all values δ < 1, increasing in the ratio x/y for all values δ > 1 and constant for δ 1. (c) Show that if x = y, the MRS...
h. U(1, 2 For the utility function above, find the consumer's optimal consumption bundle when prices of goods 1 and 2 are pl and p2, and the consumer has an income m. 1. 2. For the utility function above, find the consumer's optimal consumption bundle when prices of goods 1 and 2 are pl and p2, and the consumer has an endowment (el, e2) of the two goods. For each of your answers in question 2, write down the consumer...
Define elasticity of demand and discuss the factors that affect elasticity Discuss the concept of AIDA and its relevance for marketers. Describe each stage of the product life cycle give an example for each
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