Assume X and Y are economic goods. Plot X on the x axis and Y on...
Assume X and Y are economic goods. Plot X on the x axis and Y on the y axis using graph paper. Assume income is $50 and the price of X is $2.50 and the price of Y is $5.00. Draw the original budget line and show a utility maximizing interior equilibrium using an indifference curve.
a. Draw a new budget line if the price of X falls to $2.00. Show using indifference curves the substitution and income effects if X is inferior but not a Giffen good.
Homework Answers
Chapter 1: Economic Models III (10 points) Suppose the price for Compact disks (CDs) is $15...
Chapter 1: Economic Models III (10 points) Suppose the price for Compact disks (CDs) is $15 each. Suppose the price for downloading tracks of music legally is S1 for each song. Suppose T. Hussain has $30 to spend each month on music. Draw the budget constraint on the graph paper provided with CDs on the horizontal axis. Suppose the price of CDs falls to $10. Draw the new budget line. Show using indifference curves the beginning and ending utility maximizing...
Suppose that price for Compact Disks (CDs) is $15 each. Suppose the price for downloading tracks...
Suppose that price for Compact Disks (CDs) is $15 each. Suppose the price for downloading tracks of music legally is $1 for each song. Suppose Sophia has $30 to spend each month on music. Draw the budget constraint on a graph with CDs on the horizontal axis. (1 points) Suppose the price of CDs falls to $10. Draw the new budget line. (1 point) Show using indifference curves the beginning and ending utility maximizing choices and the substitution and income...
QUESTION 16 Suppose that price for Compact Disks (CDs) is $15 each. Suppose the price for...
QUESTION 16 Suppose that price for Compact Disks (CDs) is $15 each. Suppose the price for downloading tracks of music legally is $1 for each song. Suppose Sophia has $30 to spend each month on music. 1. Draw the budget constraint on a graph with CDs on the horizontal axis. (1 points) 2. Suppose the price of CDs falls to $10. Draw the new budget line. (1 point) 3. Show using indifference curves the beginning and ending utility maximizing choices...
2) Suppose your weekly income is $1,000. The price of a restaurant meal is $40, and the price of a gallon of gas is...
2) Suppose your weekly income is $1,000. The price of a restaurant meal is $40, and the price of a gallon of gas is $2.50. On the graph below, draw the Budget Line for Restaurant Meals and Gas. Be sure to include the x- and y-intercepts. Indicate where the utility maximizing point is using Indifference Curves. a. Suppose the price of a gallon of gas decreases to $2.15. The price of a Restaurant Meal and weekly income remain the same...
Question 2 A consumer purchases two goods, food (x) and clothing (y). He has the utility function...
Question 2 A consumer purchases two goods, food (x) and clothing (y). He has the utility function U(X,Y) = XY, where X and Y denote amounts of X and Y consumed. Marginal utilities of X and Y are MUx = y and MUy = x. The consumer’s income is $72 per week and that the price of y is Py = $1 per unit and price of x is Px1 = $9 per unit. What are his initial quantities of X and...
Homework 3 Chapter 5: Demand 1. What happens to the amount of x and y consumed...
Homework 3 Chapter 5: Demand 1. What happens to the amount of x and y consumed when income falls if x and y are normal goods? Draw a budget constraint (before the income decrease) and a convex utility curve that corresponds to the optimal consumption bundle. Draw a new budget constraint (after income falls) and a new convex utility curve that corresponds to the optimal consumption bundle. Has the amount of x and y consumed increased or decreased due to...
Jane commutes to work. She can either use public transport or her own car. Her indifference curve...
Jane commutes to work. She can either use public transport or her own car. Her indifference curves obey the four properties of indifference curves for ordinary goods 1. Draw Jane's budget line (BL,) with car travel on the vertical axis and public transport on the horizontal axis 2. Suppose that Jane consumes some of both goods. Explain how her optimal consumption bundle can be obtained. Then, draw an indifference curve that helps you illustrate that optimal consumption bundle represented by...
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...
ECON 2023 Spring 2019: Homework #1 Let the utility derived from goods X and Y be...
ECON 2023 Spring 2019: Homework #1 Let the utility derived from goods X and Y be as follows for a rational individual Unit of Good TU X TU Y 8 utils 5.5 utils 15 utils 10.5 utils 21 utils 15 utils 26 utils 19 utils 30 utils 22.5 utils 33 utils 25.5 utils З5 utils 28 utils 36 utils 30 utils 36 ubils 31.5 utils 1. Wh 2. What is the functional form of the utility function in a two-commodity...
Assume the prices of product X and Y are $1.50 and $1.00, respectively, and that Mr....
Assume the prices of product X and Y are $1.50 and $1.00, respectively, and that Mr. Chen has $24 to spend. Assume a normal indifference curve. Assume that Mr. Chen needs 4 of product X to maximize utility. a. What is the slope of Mr. Chen’s budget constraint. b. Write out Mr.Chen’s equation to his budget constraint. c. What combination of X and Y will Mr. Chen purchase? d. Now assume that the price of Y changed from $1.00 to...
Chapter 1: Economic Models III (10 points) Suppose the price for Compact disks (CDs) is $15 each. Suppose the price for downloading tracks of music legally is S1 for each song. Suppose T. Hussain has $30 to spend each month on music. Draw the budget constraint on the graph paper provided with CDs on the horizontal axis. Suppose the price of CDs falls to $10. Draw the new budget line. Show using indifference curves the beginning and ending utility maximizing...
QUESTION 16 Suppose that price for Compact Disks (CDs) is $15 each. Suppose the price for downloading tracks of music legally is $1 for each song. Suppose Sophia has $30 to spend each month on music. 1. Draw the budget constraint on a graph with CDs on the horizontal axis. (1 points) 2. Suppose the price of CDs falls to $10. Draw the new budget line. (1 point) 3. Show using indifference curves the beginning and ending utility maximizing choices...
2) Suppose your weekly income is $1,000. The price of a restaurant meal is $40, and the price of a gallon of gas is $2.50. On the graph below, draw the Budget Line for Restaurant Meals and Gas. Be sure to include the x- and y-intercepts. Indicate where the utility maximizing point is using Indifference Curves. a. Suppose the price of a gallon of gas decreases to $2.15. The price of a Restaurant Meal and weekly income remain the same...
Homework 3 Chapter 5: Demand 1. What happens to the amount of x and y consumed when income falls if x and y are normal goods? Draw a budget constraint (before the income decrease) and a convex utility curve that corresponds to the optimal consumption bundle. Draw a new budget constraint (after income falls) and a new convex utility curve that corresponds to the optimal consumption bundle. Has the amount of x and y consumed increased or decreased due to...
Jane commutes to work. She can either use public transport or her own car. Her indifference curves obey the four properties of indifference curves for ordinary goods 1. Draw Jane's budget line (BL,) with car travel on the vertical axis and public transport on the horizontal axis 2. Suppose that Jane consumes some of both goods. Explain how her optimal consumption bundle can be obtained. Then, draw an indifference curve that helps you illustrate that optimal consumption bundle represented by...
ECON 2023 Spring 2019: Homework #1 Let the utility derived from goods X and Y be as follows for a rational individual Unit of Good TU X TU Y 8 utils 5.5 utils 15 utils 10.5 utils 21 utils 15 utils 26 utils 19 utils 30 utils 22.5 utils 33 utils 25.5 utils З5 utils 28 utils 36 utils 30 utils 36 ubils 31.5 utils 1. Wh 2. What is the functional form of the utility function in a two-commodity...
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