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l. A consumer has €100 of income to allocate between chocolate and soda. Chocolate costs per...
l. (a) "Utility maximization is achieved when the budget is allocated so that the marginal utility...
l. (a) "Utility maximization is achieved when the budget is allocated so that the marginal utility per euro of expenditure is the same for each good". Explain this statement. A consumer has є100 of income to allocate between bread and pizzas. Bread costs €1 per loaf. (b) Suppose when pizza costs €5 per unit, the consumer chooses 10 pizzas. Draw the budget constraint and the indifference curve to represent this budget and choice. Be specific about where the budget line...
A Consumer's Demand for Burgers Suppose that the consumer has income, I = $20, and the...
A Consumer's Demand for Burgers Suppose that the consumer has income, I = $20, and the price of French fries is pe = $2. You are given the following information about the price of burgers and the number of burgers the consumer will buy at that price: Price of Burgers Quantity of Burgers A B C $1.00 $2.00 $5.00 10 5 2 Use an indifference curve and budget line diagram to draw the consumer's three budget lines and three optimal...
Suppose a consumer values income (m) and leisure (l) with utility function U(m,l)=ml. The consumer has T hours per week...
Suppose a consumer values income (m) and leisure (l) with utility function U(m,l)=ml. The consumer has T hours per week to allocate between labor and leisure with an hourly wage rate of w. The consumer's weekly time constraint is (m/w)+l=T. Use a Lagrangian to maximize the consumer's utility subject to the weekly time constraint. What is the optimal amount of leisure? what is the optimal amount of labor (L=T-l)
1. Emilio buys pizza for $10 and soda for $2. He has income of $100. His...
1. Emilio buys pizza for $10 and soda for $2. He has income of $100. His budget constraint will experience a parallel outward shift if which of the following events occur? a. The price of pizza falls to $5, the price of soda falls to $1, and his income falls to $50. b. The price of pizza rises to $20, the price of soda rises to $4, and his income remains the same. c. The price of pizza falls to...
I. Jack can buy two goods, chocolate and telephone calls. Suppose income is є10 and chocolate...
I. Jack can buy two goods, chocolate and telephone calls. Suppose income is є10 and chocolate costs €1 per bar. Use this information to answer the questions below. (a) When telephone calls cost 0.50 per call, Jack maximizes utility by choosing 4 telephone calls. Draw the budget constraint and the indifference curve to represent this budget and choice. Be specific about where the budget line crosses the X and Y axis. (b) Suppose the telephone company contacts Jack and offers...
Juanita enjoys consuming both soda and coffee. Each can of soda costs Ps - $1, and...
Juanita enjoys consuming both soda and coffee. Each can of soda costs Ps - $1, and each cup of coffee costs Po-$2. Suppose that Juanita buys 30 cans of soda and 20 cups of coffee per week. The following graphs show her marginal utility curves for soda and coffee. At her current consumption level, Santa's marginal utility from consuming the last can of soda she bought is MUs - 12 utils per can, and her marginal utility from consuming the...
3. Jacob receives an allowance of $5 per week. He spends all his allowance on ice...
3. Jacob receives an allowance of $5 per week. He spends all his allowance on ice cream cones and cans of Lemon Fizz soda. If the price of ice cream cones is $0.50 per cone and the price of cans of Lemon Fizz soda is $1 per can, draw a graph showing Jacob’s budget constraint. Be sure to indicate on the graph the maximum number of ice cream cones and the maximum number of cans of Lemon Fizz that Jacob...
3. A consumer lives for two periods. His income in period 1 is Y, and his...
3. A consumer lives for two periods. His income in period 1 is Y, and his income in period 2 is Y.,. The consumer is free to lend and borrow at zero interest rate (r=0 and R=1+r=1). Y, = Y, = 10. (a) What is the price of consumption in period 1 in terms of consumption in period 2? (How many units of period 2 consumption must the consumer give up to get an additional unit of consumption in period...
Question 1 (3 Points): Assume a consumer has current-period income y = 120, future-period income y'...
Question 1 (3 Points): Assume a consumer has current-period income y = 120, future-period income y' = 140, current and future taxes t = 20 and t' = 10, respectively, and faces a market real interest rate of r = 0.08, or 8% per period. The consumer has the following preferences over current and future consumption: U(c, c') = min(4c, 3c'). a) (1 points) Determine the consumer's lifetime wealth. b) (2 points) Determine what the consumer's optimal current-period and future-period...
1. (a) Illustrate, using diagrams, the income and substitution effect of a price fall for a...
1. (a) Illustrate, using diagrams, the income and substitution effect of a price fall for a normal good. Suppose there are two goods, telephone calls and bread. Bread costs є1 per loaf and income is €5. Under the existing scheme that the telephone company offers, Joe incurs a fixed fee of 2 which entitles him to 10 free calls and any calls made in excess of 10 incurs a cost of 0.10 per call. Under this scheme Joe chooses to...
l. (a) "Utility maximization is achieved when the budget is allocated so that the marginal utility per euro of expenditure is the same for each good". Explain this statement. A consumer has є100 of income to allocate between bread and pizzas. Bread costs €1 per loaf. (b) Suppose when pizza costs €5 per unit, the consumer chooses 10 pizzas. Draw the budget constraint and the indifference curve to represent this budget and choice. Be specific about where the budget line...
A Consumer's Demand for Burgers Suppose that the consumer has income, I = $20, and the price of French fries is pe = $2. You are given the following information about the price of burgers and the number of burgers the consumer will buy at that price: Price of Burgers Quantity of Burgers A B C $1.00 $2.00 $5.00 10 5 2 Use an indifference curve and budget line diagram to draw the consumer's three budget lines and three optimal...
I. Jack can buy two goods, chocolate and telephone calls. Suppose income is є10 and chocolate costs €1 per bar. Use this information to answer the questions below. (a) When telephone calls cost 0.50 per call, Jack maximizes utility by choosing 4 telephone calls. Draw the budget constraint and the indifference curve to represent this budget and choice. Be specific about where the budget line crosses the X and Y axis. (b) Suppose the telephone company contacts Jack and offers...
Juanita enjoys consuming both soda and coffee. Each can of soda costs Ps - $1, and each cup of coffee costs Po-$2. Suppose that Juanita buys 30 cans of soda and 20 cups of coffee per week. The following graphs show her marginal utility curves for soda and coffee. At her current consumption level, Santa's marginal utility from consuming the last can of soda she bought is MUs - 12 utils per can, and her marginal utility from consuming the...
3. A consumer lives for two periods. His income in period 1 is Y, and his income in period 2 is Y.,. The consumer is free to lend and borrow at zero interest rate (r=0 and R=1+r=1). Y, = Y, = 10. (a) What is the price of consumption in period 1 in terms of consumption in period 2? (How many units of period 2 consumption must the consumer give up to get an additional unit of consumption in period...
Question 1 (3 Points): Assume a consumer has current-period income y = 120, future-period income y' = 140, current and future taxes t = 20 and t' = 10, respectively, and faces a market real interest rate of r = 0.08, or 8% per period. The consumer has the following preferences over current and future consumption: U(c, c') = min(4c, 3c'). a) (1 points) Determine the consumer's lifetime wealth. b) (2 points) Determine what the consumer's optimal current-period and future-period...
1. (a) Illustrate, using diagrams, the income and substitution effect of a price fall for a normal good. Suppose there are two goods, telephone calls and bread. Bread costs є1 per loaf and income is €5. Under the existing scheme that the telephone company offers, Joe incurs a fixed fee of 2 which entitles him to 10 free calls and any calls made in excess of 10 incurs a cost of 0.10 per call. Under this scheme Joe chooses to...
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