ZuoTi.Pro
Question

3. A consumers preferences over a and y are given by the utility function u(x,y) - 2vr 2/y. The individuals income is I $100. The price of a unit of good c is $2, while the price of a unit of good y is S1. a) Graphically describe: i. the consumers preferences for r and y ii. the budget constraint (b) Find the optimal x that the consumer would choose. You may assume (c) What is the consumers MRS at (x, y) (d) Suppose that the consumers income increases by S50. an interior solution and that preferences are convex (which they are) (10, 80? Interpret. Why is this not an optimal choice of r and y? i. Graphically describe the effect of this increase in the budget con- straint. ii. Calculate the optimal level of x. What level of utility does the con- sumer reach with the new level of income? (e) Suppose now that for every unit of good a that the consumer buys, her employer provides her with an additional dollar to be spent on that good. Repeat question 3d under this assumption

business   economics   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

D O EC ake Convex to oidgin, bwith- de 1&1 50 MAS 6 3 sxy= thus at (ago), MRS not , equad to fAice Ratio, Hence duk not aw ogポWald en ce interpsetation. tMRS ua slope af fe, ft J defined as the人are oodx, to get ow Mone ut of, ephg utlity level 익 at wtun a consumes ouig to ive up a numbeu ofuuh chonged((0,9o), toget ono Mobe Y, lve ((o,9%), to get ono Mose y, give up D wdtl Now at point Hue 이x, d.) Mi=C+ 50=150。 56 y↑ Ty Soy=4x 1a I 15 G X -150 X150 45part a) graph of IC

Dr different levels of utility:

15000 10000 5000 5000 Good

0 0
Add a comment
Know the answer?
Add Answer to:
3. A consumer's preferences over a and y are given by the utility function u(x,y) -...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • * * 5. A consumer's preferences are given by the utility function U = x;'°*". The...

    * * 5. A consumer's preferences are given by the utility function U = x;'°*". The price of good 1 is 3 and the price of 2 is 6, while her income is 36. The utility maximising bundle for the consumer is a. X* = 4, x* = 4 b. x1 = 4, x = 3 C. x1 = 2, x = 6 d. x1 = 8, x* = 2 e. None of the above * * N * *...

  • 5. A consumer's preferences are given by the utility function U-2 2 The price of good 1 is 3 and the price of 2 is...

    5. A consumer's preferences are given by the utility function U-2 2 The price of good 1 is 3 and the price of 2 is 6, while her income is 36. The utility maximising bundle for the consumer is a. xi = 4, = 4 b. x1 = 4,=3 c. ri = 2 = 6 d. x = 8,5 = 2 e. None of the above 6. A consumer's preferences are given by the utility function U = . The...

  • ) A consumer's utility function is given by: U(x,y) = 10xy Currently, the prices of goods x and y...

    ) A consumer's utility function is given by: U(x,y) = 10xy Currently, the prices of goods x and y are $3 and $5, respectively, and the consumer's income is $150 . a. Find the MRS for this consumer for any given bundle (x,y) . b. Find the optimal consumption bundle for this consumer. c. Suppose the price of good x doubles. How much income is required so that the Econ 201 Beomsoo Kim Spring 2018 consumer is able to purchase...

  • A consumer has preferences represented by the utility function u(x, y) -xlyi. (This means that a....

    A consumer has preferences represented by the utility function u(x, y) -xlyi. (This means that a. What is the marginal rate of substitution? b. Suppose that the price of good x is 2, and the price of good y is 1. The consumer's income is 20. What is the optimal quantity of x and y the consumer will choose? c. Suppose the price of good x decreases to 1. The price of good y and the consumer's income are unchanged....

  • Question 2 Question 2 (15 pts) A consumer has preferences represented by the utility function u(x,y)...

    Question 2 Question 2 (15 pts) A consumer has preferences represented by the utility function u(x,y) -xlyi. (This means that a. What is the marginal rate of substitution? b. Suppose that the price of good x is 2, and the price of good y is 1. The consumer's income wWhat is the optimal quantity is 20. What is the optimal quantity of x and y the consumer will choose? c. Suppose the price of good x decreases to 1. The...

  • 1. Suppose a consumer has the utility function over goods x and y u(x,y) = 3x{y}...

    1. Suppose a consumer has the utility function over goods x and y u(x,y) = 3x{y} (a) Setup the utility maximization problem for this consumer using the general budget con- straint. (2 points) (b) Will the constraint be active/binding? Is the sufficient condition for interior solution satisfied? Prove your answers. (4 points) (c) Solve the utility maximization problem for the Marshallian demand equations x* (Px. Py,m) and y* (Px.p.m). Show all of your work and circle your final answers. (7...

  • A consumer's preferences are given by the following utility function: u(x,y) = xy Assume Pold =...

    A consumer's preferences are given by the following utility function: u(x,y) = xy Assume Pold = 1, Py = 1, and I = 8. a. Solve for the Marshallian demand functions of x and y (your answer should have numbers, not variables. You should round your answers to three decimal places): * old 4 y = 4 b. What is the utility associated with these demands, prices, and income? u = 16 c. Suppose the price of x rises to...

  • Question 2 (15 pts) A consumer has preferences represented by the utility function ufa,y)ty. (This means...

    Question 2 (15 pts) A consumer has preferences represented by the utility function ufa,y)ty. (This means that Muy and Muy ly 1) a. What is the marginal rate of substitution? b. Suppose that the price of good x is 2, and the price of good y is 1. The consumer's income is 20. What is the optimal quantity of x and y the consumer will choose? c. Suppose the price of good x decreases to 1. The price of good...

  • Sally consumes two goods, X and Y. Her preferences over consumption bundles are repre- sented by the utility function r...

    Sally consumes two goods, X and Y. Her preferences over consumption bundles are repre- sented by the utility function r, y)- .5,2 where denotes the quantity of good X and y denotes the quantity of good Y. The current market price for X is px 10 while the market price for Y is Pr = $5. Sally's current income is $500. (a) Write the expression for Sally's budget constraint. (1 point) (b) Find the optimal consumption bundle that Sally will...

  • 3. (14 points) A consumer's utility function is given by U(x,y) = x1/2y1/2 (1) Find the...

    3. (14 points) A consumer's utility function is given by U(x,y) = x1/2y1/2 (1) Find the consumer's Marshallian demand functions. (2) Find the consumer's compensated demand functions. (3) Suppose the price of good y is Py = $1 per unit and the consumer's income is 1 = $20. Find the total effects on good x and good y when the price of good x increases from px - $1 per unit to p} = $2 per unit.

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT