3. Nathaniel must divide PHP 500 between the consumption of product X and product Y. The relevant market prices are Px=50 and P=20. a. Write the equation for the consumer's budget line. Interpret the equation. b. Illustrate the consumer's opportunity set in a carefully labeled diagram, where X lies on the x-axis while Y lies on the y-axis. Interpret the consumer's opportunity set. c. Given the following indifference curves, the budget and the prices of goods X and Y, at what point is the optimal choice? Explain your answer. Good Y 40 35 30 25 20 15 10 4 6 8 10 12 14 16 18 20 22 24 26 28 30 Good X

3. Nathaniel must divide PHP 500 between the consumption of product X and product Y. The relevant market prices are Px=50 and P=20. a. Write the equation for the consumer's budget line. Interpret the equation. b. Illustrate the consumer's opportunity set in a carefully labeled diagram, where X lies on the x-axis while Y lies on the y-axis. Interpret the consumer's opportunity set. c. Given the following indifference curves, the budget and the prices of goods X and Y, at what point is the optimal choice? Explain your answer. Good Y 40 35 30 25 20 15 10 4 6 8 10 12 14 16 18 20 22 24 26 28 30 Good X

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

3.5 Marginal Utility and Consumer Choice Participation Question 7: • A consumer derives utility from consuming integer units of Good X and Good Y. See the table below for a total utility level at different consumption levels. What is the marginal utility of the second unit of Good X when the consumption of Good Y is at 3? Total Utility 1 Good X 2 Good X 3 Good X 1 Good Y 1 8. 2 Good Y 8 10 3 Good Y 10 11 A. 10 В. 5 С. 3 D. 2
Refer to the information provided in Figure 6.7 below to answer the questions that follow. Units of Y B Units of X QUESTION #25: Refer to Figure 6.7. Along budget constraint AB, the price of good X is Php10 and theprice of good Y is Php12. If the price of X increases to Php15, the budget constraint will A) pivot in at Point B. B) pivot out at Point A. C) shift in parallel to AB. D) pivot in at Point A. QUESTION #26: Refer to Figure 6.7. Along budget constraint AB, the price of good X is Php12 and theprice of good Y is Php10. If the price of Y decreases to Php8, the budget constraint will A) pivot in at Point B. B) pivot out at Point A. C) shift in parallel to AB. D) pivot in at Point A.
5. Suppose the representative consumer has the (quasilinear) utility function: U(x, y) = ax + In(v) where x,y are consumption goods. Denominated in US dollars, the prices of x and y Pi and pz, respectively. (a) What does the term quasilinear mean? Is consumption of x independent of y? (b) Assume the consumer has a budget of C dollars at his/her disposal. What is the maximum utility the consumer may achieve with this budget? (c) What is the minimum expenditure if the consumer wants to derive U,units of utility?
4. Maximize utility U = xy subject to 4x+3y=60, where x and y are the two consumption goods, 4 is the price of good x, 3 is the price of good y, and 60 is the budget. a) Set up the Lagrangian objective function. How much is the utility-maximizing consumption bundle? b) Show that the second-order condition/s is/are met (Use |Ħ₂ to identify whether it is a maximum or a minimum). c) What is the maximum utility?
Suppose you are given the following information for a particular individualconsuming two goods, a and b: Pa = $5, Pb = $6, MUa = 100, MUb = 200, and income (m) = $200.a) Sketch the budget set. What is the slope of the Budget Line? What are maximal possibleconsumptions of a and b?b) What is the MRSab for the two goods?c) Is this person maximizing her utility? How can you tell?d) Should she consume more of good a or of b? Explain.e) Why can’t you tell what her optimal bundle is? Explain.
Consider the following graph. Assume that income increases, and the budget constraint line shifts to the right. The utility-maximizing choice on the original budget constraint is A. Enable ZoomPan
answer both
Given: Assume a consumer is attempting to maximize utility subject to the budget constraint by choosing units of consumption between two goods: good 1 and good 2. Utility maximizing choices are provided in the following table for a baseline scenario and new scenario. Item Baseline New Price of Good 1 $10 $10 Price of Good 2 $10 $6 Income $20,000 $20,000 Units Consumed, Good 1 1000 1250 Units Consumed, Good 2 1000 1250 Utility 4000 5000 Using the table, how did the new event affect good 2? It caused demand for good 2 to decrease. O It caused demand for good 2 to incrcase. OIt caused quantity demanded for good 2 to increase. O It caused no change in quantity demanded for good 2. It cause quantity demanded for good 2 to decrease. It caused no change in demand for good 2.
1. An individual consumer's utility function and the budget constraint are described below. (ch. 5). U = xy s.t. m = Pxx+Pyy where, m = $100, Pz = $5, and py = $2. Note: 2 and y are the amount of x good and y good; m the amount of money, på the price of x good; Py the price of y good. (i) Find the marginal rate of substitution between x and y. (ii) Find the slope of the budget constraint (in value). [no need to draw the budget constraint.] (iii) Given the answers to (i) and (ii), find the optimal amount of each good, x* and y*. (iv) Find the level of utility obtained by this rational consumer. (v) Interpret the meaning of the answer you found in (iii) and (iv).
Principles of Economics 1 | S1 21/22 Time left 0:5) When the price of one good increases and the price of the other good and income are held constant, the budget line Select one: shifts parallel to the original budget line so that the new budget line is farther from the origin O b. shifts parallel to the original budget line so that the new budget line is closer to the origin rotates so that the intercept is farther from the origin on the axis representing the good that has experienced an increase in price O a. O c. O d. rotates so that the intercept is closer to the origin on the axis representing the good that has experienced an increase in price Next page
A consumer is choosing between magazines and books. His indifference curves and budget constraint are shown on the graph to the right. 50- 45- The utility-maximizing point is Point-B 40 Suppose that the price of books falls. 35 .... 1.) Use the line drawing tool to draw a new budget constraint (still tangent to 30- one of the indifference curves). Label this line 'L2 25- 2.) Use the point drawing tool to locate the new utility-maximizing point. Label this point 'T 20- Carefully follow the instructions above, and only draw the required objects. 15- 10- 5- 22.5 0- 35 20 25 Books 15 40 45 50 étv 15 MacBook Air 80 DII esc F2 F3 F5 F6 F7 F8 F1 ! @ $ 1 4 6. 7 8 9 Q W E IT Y tab A F つ K caps lock Z C V shift fn control option command つ Magazines N リ

Consider a consumer with M = $120 to spend (income) and faces prices PX = $15 and PY =$5 for goods X and Y. Her utility function is U(X, Y) = X1/2 + Y1/2.a Carefully. express the consumer’s choice problem, using the given information (this is whereyou write out the max operator, the choice variables, the objective function, and the budget constraint). b. Compute the absolute value of the consumer’s marginal rate of substitution, and inspect it todetermine the shape of the consumer’s indifference curves: C-shaped, linear, )-shaped, or some other shape.To show your work, neatly use the arrow argument, increasing X (↑) and decreasing Y (↓) to see whether|MRS(X, Y)| is diminishing along an indifference curve. c. If the indifference curves are C-shaped write out the budget line and the equal slopes conditionthat characterize an interior solution to the consumer’s choice problem. Use the particulars for the givenconsumer. Solve these conditions to find the interior solution. On the other…