12 PTS] Suppose you have an income of $200 this year and you expect an income of $110 next year. ...
Gerald is a CEO in Brainies Consulting, Inc. His income in the first year is m1 = $200 and in the second m2 = $200. Assume that the interest rate is r = 100%. His time horizon is limited to these two years. (a) Find PV and FV of Gerald’s income (b) Show on the graph (C1; C2) Gerald’s budget set. Mark PV, FV, and the slope of his budget line. (c) Explain what borrowing/lending strategy gives Gerald each of...
(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?...
Question 13 0/1 pts respectively, and income is M, what is the Consider a consumer with a utility function u = 1/2 3/2. If the prices for goods 1 and 2 arep, and consumer's optimal consumption of good 1? x1 = M/(3p2) Correct Answer xi = M/(41) You Answered x1 = 3M/(41) x = 4MP1/(p2) None of the above Question 14 1/1 pts Consider a consumer with a utility function y = x1/23/2. If the prices for goods 1 and...
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...
Anna spends all her income on wine (good 1) and cheese (good 2). Her utility function is u(x1; x2) = x1x2. Her income is m = $200. The prices for the two goods are p1 = $20 and p2 = $10 respectively. Find Annaís optimal consumption bundle. Show the complete calculations, and illustrate your answer graphically (draw the indi§erence curve and the budget constraint). How would your answer change to part (a) if Annaís utility function were given by v(x1;...
Lorelai's choice behavior can be represented by the utility function 11(xi, X2) = 0.91n(xi) + 0.1x2 The prices of both x 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...
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...
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...
Consider the typical example of shopping at Walmart for pants (x1) and shirts (x2). Your income endowment is $300; the price of shirts is $20, and the price of pants is $30 a) Write down a Cobb-Douglas utility function with exponents a=0.5 and 1-a=0.5. b) Write down the budget constraint for this problem. c) Set up the Lagrange and find the optimal consumption bundle for Xi and x2 (call this bundle A) d) Now assume that the price of pants...
4. Your income for this year is $50,000 and expect it will increase by 20% next year. . a) Assume the interest rate is 20%. Draw budget constraint. Please indicate the slope, intercepts and the endowment point. b) Suppose you plan to consume $60,000 this summer, what is your consumption bundle? Do you borrow or save? c) Based on b), now suppose that you have found a new investment opportunity that will get you a higher annual return. Draw the...