A consumer has a demand function for good 2,
A consumer has a demand function for good 2,
7. Suppose you know that a demand function of consumer for good 1 is p-, where pi is price of the good and xi is the quantity consumed. You know that the consumer can buy only good 1 or good 2. Her income is $2000 and the price of good 2 is P2 〉 0. (a) Find an utility function that represents the preferences of this consumer (b) Given the above utility function derive demand for good 2. (c) Suppose...
A consumer has the demand function x* = x1(P1, m). When the price of good one decreases, we observe a substitution effect of -3.9 and an income effect of 1. What can we say about good 1?
A consumer has a demand function for good 2, ?2, that depends on the price of good 1, ?1, the price of good 2, ?2, and income, ?, given by ?2 = 2 + 240 + 2?1. Initially, assume ? = ??2 40, ?2 = 1, and ?1 = 2. Then the price of good 2 increases to ?2′ = 3. a) What is the total change in demand for good 2? [2 marks] b) Calculate the amount of good...
The market for good X consists of 2 consumers. Consumer 1’s demand for good X is: X1 = 15 - 3PX + 0.5PY + .02 *I1 Consumer 2's demand for X is: X2 = 10 - PX + 0.2PY + .01*I2 I1 and I2 are incomes of consumer 1 and 2, respectively. PX and PY are the prices of goods X and Y, respectively. a. What is the equation for the market demand function for X? Graph the two individual...
20. A consumer has a utility function of U = xx for good 1 and 2. The price of one unit of good 1 is 2 and the price of good 2 is 4 per unit. In this case, if the consumer is choosing the optimal (utility- maximising) bundle: а. x2 2.5 с. 1 d. 50 e. None of the above 21. A consumer has a utility function of U = xx3 for good 1 and 2. The price of...
1. When a consumer has a Cobb-Douglas utility function given by u(x, y) = xa yb , their demand for good x is given by x∗ = m/Px (a/a+b) where m is income and Px is the price of good x. Using this demand function, find the formula for this consumer’s price elasticity of demand. Interpret it in words.
(a) A representative consumer has a utility function U (x, y) = xy. A representative firm makes good x and has a production function x = f(k, l) = (kl)0.25and an unavoidable fixed cost equal to A. There are 100 consumers and, initially, 100 firms. Prices are w = v = Py = 1 and Px is determined in a competitive market. Representative consumer income is I = 2. (a) Find the representative individual’s Marshallian demand for good x?
Problem 2 (30 marks) A consumer has a utility function (11,12)= = = (a) Express the consumer's demand for good l as a function of prices and income. (b) Draw an Engel curve for the consumer's demand for good 1 when the prices are given by Pi = 1, and P2 = 1. (c) Draw another Engel curve for the consumer's demand for good 1 when the prices are given by Pi = 1, and p2 = 3. (d) Draw...
1. There are two potential consumers for a public good. Consumer 1 has inverse demand P 1 = 30 − Q, Consumer 2 has inverse demand P 2 = 60 − 3 Q, where Q is the level of provision of the public good. The marginal cost of providing the public good is 30. What is the optimal level of provision of the public good? 30 0 25 15 2. Production of widgets creates pollution: a negative externality. The marginal...