1. If a consumer has a utility function u (x1, x2)spend on good 2?= x1x, what fraction of her income will2. For what kind of preferences (or utility) will the consumer be just as well-off facing aquantity tax as an income tax that raises the same money for the government?3. When prices are (P1, P2) = (1,2) a consumer demands (x1, x2) = (1,2), and when prices are(P1, P2) (2,1) the consumer demands (x1, x2) = (2,1). Is this behavior consistent with=the model of utility maximization?4. When prices are (P1, P2) = (2,1) a consumer demands (x1, x2) = (1,2), and when prices are=(P1, P2) (1,2) the consumer demands (x1, x2) = (2,1). Is this behavior consistent withthe model of utility maximization?

The first question is asking about the fraction of income a consumer will spend on good 2 given a…

Answered: 1. If a consumer has a utility function…

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

assume that both X and Y are goods s.) Consider a person whose preferences can be represented by the utility function U(X,Y). T/F: "The following function could not possibly represent even a portion of this 4. person's Marshallian demand function for X: X"(Px.Py,1) Px 0py 261-25" true/false
Suppose that a consumer perceives X and AOG (all other goods) to be perfect (one-for-one) substitutes. The consumer has an income of $100 and the price of x is 80 cents. If the price of x rises to 1.20, what is the resulting change in consumer surplus? Show work and explain
Suppose a consumer’s preferences over two goods x_1 and x_2 are given by u = Square root (X_1,X_2). Her income is M and the two goods cost p1 and p2 per unit respectively. a) Derive her utility at the optimal consumption point as a function of prices and income. b) Now suppose the government imposes a proportional tax t on the value of the good x_1 (such as VAT). If the consumer approaches the government for income compensation to remain as well off as before the tax (i.e. compensating variation in income), how much money would she ask for? c) If instead, the government decides to maintain consumer’s utility level not through lump-sum transfer but by introducing a proportional subsidy S on the price of good 2, then what should be the size of the subsidy? d) Based on your answer in part c) discuss how much would it cost for the government to introduce both a tax and a subsidy at the same time? Can you think of any situation when this policy would make sense?
: For a certain product, the demand function is D(Q)=800-82Q and the supply function is S(Q)=80+Q2. Compute the consumer surplus.
I need the answer as soon as possible
!
Let the consumer have the utility function a. Show that the utility maximizing demands are and b. Letting p1 = p2 = 1, use the inverse elasticity rule to show that the optimal tax rates are related by c. Setting w = 100, r1 = 0:75, and r2 = 0:5, find the tax rates required to achieve revenue of R = 0:5 and R = 10. d. Calculate the proportional reduction in demand for the two goods comparing the no-tax position with the position after imposition of the optimal taxes for both revenue levels. Comment on the results.
2. David has the utility function u(e,g) = 8,000ln(e) + g, where e represents money spent on education and g represents money spent on other goods. He has M = $50,000 to spend. (i) Suppose that the government gives David a lump-sum subsidy of $L. Find his optimal bundle. (ii) Now suppose that the government gives David a voucher for $V worth of education and a lump-sum subsidy of $(L – V) instead. Find David's optimal bundle. (Assume V < L.)
3.00 0.10 q 20 Figure 9.6 shows an individual's demand curve for time per month spent telecommunicating while driving (talking on the car phone.) A car phone is useless except for talking with somebody who is not in the car. If calls are priced at ten cents per minute, what is the consumer surplus derived from talking? What is the most this person would pay for the car phone? Explain.
Exercise 2 Suppose you have the following hypothetical demand or sales function. Qx= -4Px+2Py+0.201+0.04A and PX = $200, (price of good X) PY =$230, (price of good Y) 1 = $1,500 (disposable per capita income) A=$12,000 (advertizing expenditures) a. Write out a reduced demand function b. Solve for and write out the demand curve equation c. Give a narrative interpretation for the coefficient of I d. How could we classify good X and good Y? Explain why.
Question 1. Assume that consumer has the following demand function for good X m x1 = 10+ 10р1 If income is 200 and product is sold for price of 10, find subsitition and income effect in case of new price of 6 dollars. Show it on the graph as well.
Yam has the following utility function for Apples (X1) and Ice Cream (X2). U(X1,X2) = Min{3X1,X2). If the prices of Apples and Ice Cream are p1 =$1, p2 -S1. Suppose a quantity tax of $1 is imposed on Apples. Which of the following is true after the imposition of the tax? O a. Yam's demand for Ice Cream will not decrease O b. Only Yam's demand for Apple will decreased C. Yam's demand for both Ice Cream and Apple will decrease O d. The tax will not change Yam's utility

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