2. A consumer with the utility function U(x1,x2) = x2x2 faces prices p₁ = 4, p₂ = 5 andhas an income of $200. Compute the effect of an infinitesimally small increase inincome on the consumer's maximized utility. Hint: Lagrange.3. Consider the consumer in (2). Suppose a tax of $1 per unit is imposed on theconsumption of x1.a. How much tax revenue would be raised as result?b. What is the consumer's utility level after the tax?c. If the same tax revenue was raised via a lumpsum income tax, leaving pricesunchanged, compute the consumer's utility level after the lumpsum tax.Only 3, but it requires some conditions in2.I will upvote if correct, thank you somuch!!!!

Answered: 2. A consumer with the 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

8
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
Please don't use Ai solution
My utility over goods 1 and 2 is given by: u (x₁, x2) = min {2,} - Where is the quantity of good 1 I consume and 2 is the quantity of good 2 1 consume. Assuming I purchase only goods 1 and 2... W If a = 6, b =7, the price of good 1 is $5/unit, the price of good 2 if $6/unit and my income is $10, how much good 2 will I consume to maximize my utility? (Note: The answer may not be a whole number, so round your answer to the nearest hundredth) (Note: The numbers may change between questions, so read carefully)
What is Lea's own-price substitution effect of the price increase due to the tax ?
Marvin has a Cobb-Douglas utility function, 0.5 0.5 U= 91 92 his income is Y = $900, and initially he faces prices of p₁ = $1 and p2 = $4. If p₁ increases from $1 to $2, what are his compensating variation (CV), change in consumer surplus (ACS), and equivalent variation (EV)? Marvin's change in consumer surplus (ACS) is $ minus sign if necessary.) Marvin's compensating variation (CV) is $. (Enter your response rounded to two decimal places and include a minus sign if necessary.) (Enter your response rounded to two decimal places and include a Marvin's equivalent variation (EV) is $. (Enter your response rounded to two decimal places and include a minus sign if necessary.)
What is the exact change in Jackie's consumer surplus. A+B7 How large is area 87 In this example, assume the price of music tracks (in pounds) increases from £0.6 to £1, as shown in the figure. Also, let Y be Jackie's income, which is £30. State Jackie's uncompensated demand function for music tracks given her initial budget Jackie has a utility function where is music tracks and is live music. Let py be the price of music tracks and let the price of live music be normalized to one If income, Y, is 30, what is Jackie's uncompensated demand for music tracks, 9₁? Jackie's uncompensated demand for music tracks, q₁, as a function of p Pounds pertrac 0.6 AA 6 10 Demand Music tracks 2
Bob has utility function U(x,y)=x2+y over goods x and y a) Do we have a name for this type of utility function? Are Bob's preferences well-behaved? b) Let Bob have budget I=$60, and let prices be Px=$30, Py=$10. Find Bob's optimal basket of goods x and y. Is this an interior or corner solution? c) What will happen if the price of good y doubles? [Think about: can we use this utility function to describe preferences over pet snakes and pet mice?]
12) A consumer’s preferences are given by U(X,Y) = X0.6Y0.4. The price of X is 4, and the price of Y is 5. The consumer has an income of $2000.a) What is the utility maximizing choice of X and Y?b) How would the utility maximizing choice change if price of X falls to 3 because of a pricesubsidy?c) Given the answers to the previous parts plot a linear demand function for X.d) Show that the consumer would prefer the cash equivalent of the price subsidy in part b.
Assume a consumer has a utility function given by u(x,y)=x+y , with an income of $100. Consider a $1 per-unit tax on good 1. Suppose a lump sum tax raises the same amount of income as the per-unit tax. How much income must it raise?
PROBLEM 3 – Slutsky Equation, Income Effect, Substitution Effect, and Total Effect There are two goods which quantities are to be denoted by x and y, while prices are denoted by px and py, respectively. There is a consumer whose income is to be denoted by I and utility by u. His expenditure function is known to be: *see image* Suppose the consumer already spend $90 on good x which cost $1 and good y which cost $1, and initially purchase 60 of good x and 30 of good y. i. If the price of good x increase to $2, how many will he purchase each of the goods? ii. How much of the decrease in his demand for good x is due to the fact that they have become relatively more expensive? How much is due to the fact that his overall purchasing power has decreased? [Hint: find first the initial utility before the price change and income level needed to reach those initial utility with new prices. Slope of the indifference curve is given by MRS = -2y/x] iii. Based on your answer, draw it in a graph…
Given the following utility function: and marginal utilities: A consumer facing the following prices: chooses to consume: U = 2X + 2Y Assume that graphically good X is on the horizontal axis and good Y is on the vertical axis. Given this consumption bundle, the marginal rate of substitution is equal to - Given this value, the consumer should consume MU, = 2, MU, = 2 P, = $2, P, =5 15 units of good X and 19 units of good Y. (Round your answer to two decimal places. Note that the minus sign is already included). in order to maximize his/her 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