Margaret spends all of her income on t-shirts (x1) and shoes (x2). Her preferences can be...
Margaret spends all of her income on t-shirts (x1) and shoes (x2). Her preferences can be represented by the utility function u (x1, x2) = 2√x1x2.
(a) Identify whether t-shirts are normal, inferior, or neither; explain how you arrived at your conclusion.
(b) Identify whether shoes are ordinary, Giffen, or neither; explain how you arrived at your conclusion.
(c) Identify whether two goods are complements, substitutes, or neither; explain how you arrived at your conclusion.
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Margaret spends all of her income on t-shirts (x1) and shoes
(x2). Her preferences can be...
Margaret spends all of her income on t-shirts (x1) and shoes (x2). Her preferences can be...
Margaret spends all of her income on t-shirts (x1) and shoes (x2). Her preferences can be represented by the utility function u (x1, x2) = 2√x1x2 (a) [15 Points] Derive the demand functions for t-shirts and shoes in terms of the price of t-shirts (p1), the price of shoes (p2), and income (m). Show your result on a graph. (b) [10 Points] Draw the Income Offer Curve and Engel Curves (one for each good). (c) [10 Points] Draw the Price...
(38pts) Suppose a consumer spends all of her income on only two goods, z and y. Her preferences o...
(38pts) Suppose a consumer spends all of her income on only two goods, z and y. Her preferences over these two goods are represented by the utility function u(r,y) min(, 4y). The price of good y is given to be S8. Her income and price of z are represented by m and ps, respectively. (a) (10 pts) Find the demand for good z as a function of m and pa. (b) (5 pts) Is good z ordinary or Giffen good?...
Benjamin spends his time either watching movies (x1) (he uses "on demand" option, cable TV) or li...
Benjamin spends his time either watching movies (x1) (he uses "on demand" option, cable TV) or listening to songs - MP3 downloaded from the Internet (x2) . His preferences are described by U(x1,x2) = ln(x1) + ln(x2) a) Derive Benjamin's demand for movies and MP3 files as a function of prices p1,p2, and his income m. (do not use Cobb Douglas formula but rather derive demand using "two secrets of happiness"). b) Fix the price of MP3 at p2 =...
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The utility function is u = x1½ + x2, and the budget constraint is m =...
The utility function is u = x1½ + x2, and the budget constraint is m = p1x1 + p2x2. Derive the optimal demand curve for good 1, x1(p1, p2), and good 2, x2(m, p1, p2). Looking at the cross price effects (∂x1/∂p2 and ∂x2/∂p1) are goods x1 and x2 substitutes or complements? Looking at income effects (∂x1/∂m and ∂x2/∂m) are goods x1 and x2 inferior, normal or neither? Assume m=100, p1=0.5 and p2=1. Using the demand function you derived in...
4. Blythe currently spends all of her income on B = bottles of beer and R=Red...
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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...
Assume that Jean has an annual income of $50,000, and she spends her income on milk (X) and all o...
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Question 2: Lorelai's choice behavior can be represented by the utility function u(x1, 2)0.9Inx)0.1x2 The prices...
Question 2: Lorelai's choice behavior can be represented by the utility function u(x1, 2)0.9Inx)0.1x2 The prices of both x1 and x2 are $5 and she has an income of $40. 1. What preference does this utility function represent? (Hint: the utility is function is not linear, 2. Drawinwg indifference curves: you can copy down the graph on your paper using econgraphs. Set but at least linear in good x2) the preferences and parameters accordingly as given in the question. Click...
Lorelai's choice behavior can be represented by the utility function u(x1, 2) 0.9n(x)0.1x2. The prices of...
Lorelai's choice behavior can be represented by the utility function u(x1, 2) 0.9n(x)0.1x2. The prices of both xi and x2 are $5 and she has an income of $40. 1. What preference does this utility function represent? (Hint: the utility is function is not linear, but at least linear in good x2) 2. Drawinwg indifference curves: you can copy down the graph on your paper using econgraphs. Set the preferences and parameters accordingly as given in the question. Click on...
(38pts) Suppose a consumer spends all of her income on only two goods, z and y. Her preferences over these two goods are represented by the utility function u(r,y) min(, 4y). The price of good y is given to be S8. Her income and price of z are represented by m and ps, respectively. (a) (10 pts) Find the demand for good z as a function of m and pa. (b) (5 pts) Is good z ordinary or Giffen good?...
4. Blythe currently spends all of her income on B = bottles of beer and R=Red Wing games. Beer costs $15 per bottle, and the price of hockey games is $14 per game. Assume that Blythe is not allowed to drink her beer at the Red Wing games. Blythe's marginal utility for beer is 300, and her marginal utility for Red Wing games is 294. (Assume all goods are perfectly divisible.). Determine whether Blythe is at her optimal consumption. If...
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...
Question 2: Lorelai's choice behavior can be represented by the utility function u(x1, 2)0.9Inx)0.1x2 The prices of both x1 and x2 are $5 and she has an income of $40. 1. What preference does this utility function represent? (Hint: the utility is function is not linear, 2. Drawinwg indifference curves: you can copy down the graph on your paper using econgraphs. Set but at least linear in good x2) the preferences and parameters accordingly as given in the question. Click...
Lorelai's choice behavior can be represented by the utility function u(x1, 2) 0.9n(x)0.1x2. The prices of both xi and x2 are $5 and she has an income of $40. 1. What preference does this utility function represent? (Hint: the utility is function is not linear, but at least linear in good x2) 2. Drawinwg indifference curves: you can copy down the graph on your paper using econgraphs. Set the preferences and parameters accordingly as given in the question. Click on...
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