4. Mrs. May always drinks each cups of coffee (1) with two spoons of sugar (22). She would never consider consuming them in any other proportion. Suppose she has an income of $3, the price per cup of coffee is $0.2, and the price per spoon of sugar is $0.05. 1) Write down a utility function that represents Mrs. May's preferences for coffee and sugar. Draw several of her indifference curves. 2) Can you help her to find her optimal consumption bundle? . 3) Suppose that due to new coffee import taxes, the price of coffee goes up to $0.3. Find her nwe optimal bundle. How much will she be paying in coffee taxes?

4. Mrs. May always drinks each cups of coffee (1) with two spoons of sugar (22). She would never consider consuming them in any other proportion. Suppose she has an income of $3, the price per cup of coffee is $0.2, and the price per spoon of sugar is $0.05. 1) Write down a utility function that represents Mrs. May's preferences for coffee and sugar. Draw several of her indifference curves. 2) Can you help her to find her optimal consumption bundle? . 3) Suppose that due to new coffee import taxes, the price of coffee goes up to $0.3. Find her nwe optimal bundle. How much will she be paying in coffee taxes?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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2 Indifference curves Suppose an individual who derives utility u(x, y) from consuming a units of good X and y units of good Y. Derive the indifference curve for a level of utility U for each of the following utility functions. Draw them in the graph below for a utility level U = 18. (A) u(x, y) = 2x + 3y (B) u(x, y) = min{3x, y} (C) u(x, y) = xy
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Yam has the following utility function for Apples (X1) and Ice Cream (X2), U(X1,X2) = Min{3X1,X2}. Yam likes to get more of both Apples and Ice Cream. Suppose Yam has an income of M = $160 budgeted to be spend on these two goods and the prices of Apples and Ice Cream are p1 =$2, p2 =$1. Yam's optimal consumption of Apples is and Ice Cream is (Please put your answer in numerical values with no comma or decimal place.) Suppose a quantity tax of $1 is imposed on Ice Cream. Yam's after tax optimal consumption of Apples is and Ice Cream is (Please put your answer in numerical values with no comma or decimal place.) Suppose instead of the quantity tax, the government choose to impose a lump-sum tax of $20. After the imposition of the lump-sum tax, Yam's optimal consumption of Apples is and Ice Cream is (Please put your answer in numerical values with no comma or decimal place.) If government would have to impose one of these 2 kinds of taxes, which of these types of tax would be better…
Suppose Jeff has a perfect substitute preferences for watching movies (M) and TV (T) shows. Jeff's MRSTM is such that he is always indifferent between watching one movie and five TV shows independent of the amount of goods consumed. Which of the following statements is true? If Jeff had a choice between 1 movie and 1 TV show before bed, he would choose to watch the movie. If Jeff has already watched 3 movies and no TV shows, then he would prefer to watch a TV show next. He is indifferent between watching 1 TV show or 1 movie before bed. Jeff would prefer watching 2 TV shows and no movies over watching 2 Movies and no TV shows.
6.
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I. You only consume two goods and your preferences are represented by utility function 2 U(x₁, x₂) = (x1.5 + x2.5) for x₁ > 2 and x₂ > 0.