15. The assumption that preferences are complete requires the consumer: (a) To rank any two bundles (b) To say bundle C is preferred to bundle A if bundle B is preferred to bundle A and bundle C is preferred to bundle B (c) To rank a bundle with more units of all goods higher than a bundle with fewer units of all goods (d) To have a diminishing marginal rate of substitution

15. The assumption that preferences are complete requires the consumer: (a) To rank any two bundles (b) To say bundle C is preferred to bundle A if bundle B is preferred to bundle A and bundle C is preferred to bundle B (c) To rank a bundle with more units of all goods higher than a bundle with fewer units of all goods (d) To have a diminishing marginal rate of substitution

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter6: Consumer Choice And Demand

Section: Chapter Questions

Problem 13PAE

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Recent research confirms that the demand for cigarettes is not only inelastic, but it also indicates that smokers with incomes in the lower half of all incomes respond to a given price increase by reducing their purchases by amounts that are more than four times as large as the purchase reductions made by smokers in the upper half of all incomes. How can the income and substitution effects of a price change help explain this finding?
A consumer has the following utility function: Ulx, y) = xy -y, *21 where x and y represents the quantities consumed of goods X and Y. y 20 What will be the substitution and income effects for X and Yassuming that the consumer attempts to maintain the same level of utility achieved before price of Y increased (that is, when price of Y was $1)? SEx= +0.5 IEx = -0.5 SE, = -0.25 IE- = -0.25 SEx= +0.293 IE = -0.293 SEy = -0.414 IE, = +0.414 SEr= +0.25 IE SE, = -0.75 IE, = -0.75 = -0.25 SEx= +0.414 IEx = -0.414 SEy = -0.293 IE, = -0.207 Income = $3 Px= $1, Py= $2
24. According to the chart below, which bundle is most preferred, assuming TOTAL UTILITY is the product of the quantity of popcorn and the quantity of sodas (i.e. under the TOTAL UTILITY theory)? Bundle A B A) Bundle A B) Bundle B C) Bundle C D) Bundle D C D Quantity of Popcorn 6 5 4 7 Quantity of Sodas 7 8 9 5 13 13 13 12
Assume that Talib has well-behaved preferences and consumes hamburgers (vertical axis) and steak (horizontal axis). Further, Talib perceives hamburgers as an inferior good and steak as a normal good. Draw the effect of a decline in the price of steak on Talib’s optimal consumption of hamburger and steak. Make sure you show both substitution and income effects on both goods (axes). Clearly label your graph
2. George has preferences for food X and clothing Y described by a utility function U(X,Y)=XY¹2. a) Find his demand function for food. Assume prices for food and clothing are Px and Py. Income is I. b) What is the relationship between the two goods: food and clothing for George? Why? c) On a clearly labeled graph, illustrate the income and substitution effects of the price increase on the consumption of food.