1. Hagrid spends his income on Acid Pops and Butterbeer, two treats enjoyed widely in the wizarding world. Hispreferences can be represented by the following utility function: U(a, b) = 4a² + b.a. Set up Hagrid's utility maximization problem without solving it. Denote the price of Acid Pops by pa andthe price of Butterbeer by p, and income by Y. Clearly identify the objective function, the constraint,and the variables that represent the things Hagrid can choose when picking his optimal bundle.b. Solve for Hagrid's Marshallian (uncompensated) demand for both goods, that is, the quantity demandedfor any possible prices and income level. Assume an interior solution. Note: The substitution method isrecommended but any approach is fine.Use your answer to part b and calculus to determine how Hagrid's Marshallian demand responds tochanges in income. Give a brief (intuitive) description of what each equation implies about Hagrid'sdemand of Acid Pops and Butterbeer.C.

The objective of this question is to set up and solve Hagrid's utility maximization problem, given…

Answered: 1. Hagrid spends his income on Acid…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Kai spends his income on lime (L) and ginger water (G). Lime is priced at $2, while ginger water costs $1. Suppose Kai has $30 to spend and his utility function can be represented as U(L,G) = L0.5 G0.5 What is the optimal number of lime and ginger water for Kai to purchase? b. How much utility does this combination bring him?
1. Consider a consumer who consumes two goods. The utility function is given by u(x1, x₂) /2x1+1+√√√x₂, - where x > 0 denotes the amount of good i = the price of good 1 is 3, the price of good 2 is p2 > 0, and the income is 12. 1,2 consumed. Unless stated otherwise, (1) Calculate the marginal rate of substitution (measuring the value of good 1) at the consumption plan (x₁, x₂) = (3, 4). (2) Calculate the consumption plan that is optimal for the consumer. (3) Let v(p₂) denote the utility level at the optimal consumption plan. Calculate its derivative with respect to p2, i.e., v'(P2), at p2 = 3. (4) Suppose that p2 = 1 and the utility level is 10. Calculate the compensated demand for each good.
Starting with utility function U= U(X, Y) and budget constraint PxX+ PyY= M, derive the equili- brium condition using calculus.
I need help with this homework question.
Q2. Suppose a consumer seeks to maximize the utility function U (x, y) = (x + 2) (y + 1), where and y represent the quantities of the two goods consumed. The prices of the two goods and the consumer's income are pa, py, and I. Write out the consumer's budget constraint and the Lagrangian function for the problem.
Help!
Consider the following utility function: U= 100x0.50,0.50 A consumer faces prices of P, = $2 and P, =$1. Assuming that graphically good X is on the horizontal axis and good Y is on the vertical axis, suppose the consumer chooses to consume 6 units of good X and 11 units of good Y. Then the marginal rate of substitution is equal to: MRS = 1.83. (Enter your response rounded to two decimal places. Do not forget to include the negative sign.) Use absolute values. The consumer should consume to maximize utility. more Y and less X the same amount of X and Y more X and less Y O étv MacBook Air 80 esc F1 F2 F3 F4 F5 F6 F7 F8 # $ % & 1 2 7 Q W E T Y tab S D F G caps lock C V M ft control option command つつエ B N
Two friends, Karol and Manuel, like to drink kombucha (x₁) and matcha (x₂). Both X₁ and X2 are expressed in ounces. The following utility function represents Karol's preferences: 1 1 2 2 u (x1, x2) = x1 x3 The following utility function represents Manuel's preferences: u (x₁, x2) = √√x1 + x2 Karol's income in dollars is denoted by mk, and Manuel's income is denoted by mm. Both face the same prices in the market, denoted by p₁ and p2, for kombucha and matcha, respectively. Both prices are expressed in dollars per ounce. Assume p₂=1 throughout the whole question. 1) Draw Karol's and Manuel's indifference curves in separate graphs and describe any important similarities or differences between the two.
2) Which of the following utility functions represent the same preferences? Explain. a) U (x₁, x₂) = X₁ X₂ b) W (x₁, x₂) = 5lnx₁ +5lnx₂ c) V (x₁, x₂) = x₁¹/3x₂ ¹/3 - 0.8 d) Z(x₁, x₂) = 0.5x₁ + 0.5x₂
Suppose the function for the utility from good c is denoted as U(c)=2c2. Which of the following expressions indicates the marginal utility of c? 1/c2 1/square root of c All of the above are correct.
1.2 Ann and Bob each own 10 bottles of beer and, altogether, they own 20 bags of peanuts. There are no other people and no other goods in the economy, and no production of either good is possible. Using a to denote bottles of beer and y to denote bags of peanuts, Ann's and Bob's preferences are described by the following utility functions: UA (XA, YA) = TAYA and UB (XB, YB) = 2xB+ YB. In each of the following cases, determine the market equilibrium price ratio and allocation and depict the equilibrium in an Edgeworth box diagram. (a) Bob owns 20 bags of peanuts and Ann owns no peanuts. (b) Bob owns 15 bags of peanuts and Ann owns 5 bags. (c) Ann owns 20 bags of peanuts and Bob owns no peanuts.
Allan is considering his purchase of food (F) and clothing (C). He has utility function UF,C=fc+10f. His income is I=10. He faces a price of food $1 and price of clothing $2. According to this information: 1. Determine the marginal utility of food and clothing, and the budget line of Allan 2. Determine Allan’s optimal basket, and provide a graph indicating that optimal point. Explain your finding

SEE MORE QUESTIONS

Recommended textbooks for you

ENGR.ECONOMIC ANALYSIS

Economics

ISBN:

9780190931919

Author:

NEWNAN

Publisher:

Oxford University Press

Principles of Economics (12th Edition)

Economics

ISBN:

9780134078779

Author:

Karl E. Case, Ray C. Fair, Sharon E. Oster

Publisher:

PEARSON

Engineering Economy (17th Edition)

Economics

ISBN:

9780134870069

Author:

William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

Publisher:

PEARSON

ENGR.ECONOMIC ANALYSIS

Economics

ISBN:

9780190931919

Author:

NEWNAN

Publisher:

Oxford University Press

Principles of Economics (12th Edition)

Economics

ISBN:

9780134078779

Author:

Karl E. Case, Ray C. Fair, Sharon E. Oster

Publisher:

PEARSON

Engineering Economy (17th Edition)

Economics

ISBN:

9780134870069

Author:

William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

Publisher:

PEARSON

Principles of Economics (MindTap Course List)

Economics

ISBN:

9781305585126

Author:

N. Gregory Mankiw

Publisher:

Cengage Learning

Managerial Economics: A Problem Solving Approach

Economics

ISBN:

9781337106665

Author:

Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:

Cengage Learning

Managerial Economics & Business Strategy (Mcgraw-…

Economics

ISBN:

9781259290619

Author:

Michael Baye, Jeff Prince

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS