3. Assume a person has a utility function U = XY, and money income of GH¢ 10,000, facing an initial price of X of GH¢ 10 and price of Y of GH¢ 15. If the price of X increases to GH¢15, answer the following questions: a. What was the initial utility maximizing quantity of X and Y? What is the new utility maximizing quantity of X and Y following the increase in the price of X? c. Calculate the substitution effect and the income effect on X of this increase in the price of X using the Slutsky analysis. b.

3. Assume a person has a utility function U = XY, and money income of GH¢ 10,000, facing an initial price of X of GH¢ 10 and price of Y of GH¢ 15. If the price of X increases to GH¢15, answer the following questions: a. What was the initial utility maximizing quantity of X and Y? What is the new utility maximizing quantity of X and Y following the increase in the price of X? c. Calculate the substitution effect and the income effect on X of this increase in the price of X using the Slutsky analysis. b.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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4. John has a utility for the quantity of sandwiches, Xs, and quantity of burgers, Xp, that he consumes, represented by the following equation: U(X,X) = XX His income is Y = $24. The price of a sandwich changes from X, = $1 to X, = $4 while the price of a burger remains at X, = $6. Solve for the compensating variation and equivalent variation associated with this price increase.
Indicate whether the statement is True or False, and briefly explain why: A. Marginal benefit equal to marginal cost is the point where consumers are maximizing their satisfaction within their budget. B. The marginal benefit is equal to the marginal utility you obtain from consuming one extra unit of the good. C. What matters for consumers when they want to decide to buy one more unit of a good is how much utility they got from all the units they consumed before. D. Elasticity can be related to the measure of a percentage change in quantity demanded divided by the percentage change in the price of a good.
Question 3: Robert's utility is given by U(x,x)=ln x + ln y, and therefore MUX-1/x and MUX-1/y. Let the prices and income be Px. Py and m. a. Find Robert's demand for x and y b. How is Robert's demand for x affected by an increase in Py? Explain
Guerdon always puts half a sliced banana, q, , on his bowl of cereal, q, The two 14 goods are perfect complements. What is his utility function? Derive his demand curve for bananas graphically and mathematically. 12- 10- e, Guerdon's utility function (as a function of q, and q2) is 6- VA U= min/2q1.92} 4- O B. U=q, +92- 2- 0+ OC. U=29, + q92- 10 12 14 16 18 20 6 22 Bananas O D. U=0.5q1 + q2- OE. U=q, xq2- 5.00- 4.50- Guerdon's demand function for bananas (as a function of the price of bananas, P1. the price of a bowl of cereal, p2, and income, Y) is 4,00- 3.50- 91 = (p1 + 2p2) (Properly format your expression using the tools in the E 3.00 palette. Hover over tools to see keyboard shortcuts. E.g., a subscript can be created with the_ character.) 2.50- * 2.00- P. 1.50- 1.00- 0.50- 0.00+ 10 12 14 Bananas tv 80 DI DD F1 F3 F4 F5 F6 F7 F8 F10 @ %23 $ & 1 3 4 7 Q W E Y U S F H. J く C V M option command command optic ーの * CO Cereal (bowls) p. S per banana B * * N A
2. Anne's preference can be represented by the following utility function: U(x, y) = x® y". a) Find the optimal bundle for Anne that minimizes her expenditure. b) Write down the expenditure function. c) In a graph, show how her optimal bundle would change if the price of x increases (assume price of y remains the same).
A consumer's weekly income is $5000, the price of a cell phone is $1250, and the price of a watch is $500. What quantity of cell phones and watches will maximize the consumer's utility if they spend their entire weekly income on cell phones and watches? Explain your using I. answer marginal Suppose that this consumer's income elasticity for watches is analysis. 5.4. what does this indicate about watches? If the cross-elasticity calculates to 0.8 what does this indicate about the relationship between watches and cell phones?
3. Balancing utility and price Suppose Teresa has to choose between purchasing plane tickets and milk. Which of the following is the utility-maximizing rule that Teresa should follow while choosing the optimal quantities of these two goods? (Note: In the answer options that follow, MU stands for "marginal utility.") O (MU of Milk) x (Price of Milk) = (MU of Plane Tickets) x (Price of Plane Tickets) O MU of Milk = MU of Plane Tickets MU of Milk MU of Plane Tickets %3D Price of Milk Price of Plane Tickets MU of Milk MU of Plane Tickets = Price of Plane Tickets Price of Milk Since milk costs little and plane tickets are expensive, it must follow that when people choose their optimal quantities of milk and plane tickets to purchase, the marginal utility they receive from the last plane ticket they buy is v than the marginal utility they receive from the last gallon of milk they buy.
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.
3. If all other factors remain the same, what happens to the demand curve for coffee if there is: (a) an increase in the price of tea, (b) a decrease in family income, (c) an increase in the price of coffee? In answering these questions draw and carefully label a set of axes. On the horizontal axis of your graph, show the quantity of coffee. On the vertical axis show the price per cup of coffee. Since you do not have specific data on prices and quantities demanded, just indicate prices with a P and Quantity with a Q. Focus on the general shape and position of the curves before and after events occur. Draw new curves to show what happens in each of the circumstances given, if necessary. 3. If all other factors are unchanged, what happens to the supply curve for coffee if there is: (a) an increase in wages paid to coffee store clerks, (b) an increase in the price of coffee, or (c) an increase in the number of coffee stores? In answering these questions draw graphs, as necessary, using…
Imagine two goods, x and y, with a given budget of 10 pesos. Prices of good x and y are P2 and P3 respectively. Suppose the price of good x increase by P2. What happened to the consumer’s utility? Select one: a. Budget line will pivot to the right and consumption of good x will decline b. Budget line will shift to the right and consumption of good x will decline c. Budget line will shift to the left and consumption of good x will decline d. Budget line will pivot to the left and consumption of good x will decline
Question In the utility function above, x and y are substitutes.The Consumer Maximization Problem is as follows:Max(x;y)=5x + 6y subject to x + 2y = 10, We know MRSxy=5/6, find it by setting U(x, y) = U¯ and solving the utility function for y and what is the price ratio? Full explain this question and text typing work only thanks
21:45 Sat 7 Aug 26% O Screenshot_20210807-213016_Office.jpg 21:30 a) Choose X, and X, to max the utility fxn, U(X,X) =ahX;+(l-a)\n X, st: M = P, X 1 + P,X , a) Consider a price decrease for good 1 from P, toP . Write down the Demand functions for good 1 when prices are P, and when prices drop from PtoP b) What is the compensating income, M° associated with the price change? C) Obtain the SE and IE associated with the price change II