A Consumier s utility is given With marginal utiities being M 0X Prices are Px = 4 and Py = 8. Consumer's income is I = 120. The optimal bundle for this consumer has units of X and units of Y. Then, price of X changes to Px = 1. Now the optimal bundle for this consumer has units of X and units of Y. If the consumer wanted to achieve the same level of utility under the new prices as they had under the old prices, the optimal bundle would have units of X and units of Y. (Hint: this is the decomposition bundle) The substitution effect of this price change is units of + and the income effect is units of

A Consumier s utility is given With marginal utiities being M 0X Prices are Px = 4 and Py = 8. Consumer's income is I = 120. The optimal bundle for this consumer has units of X and units of Y. Then, price of X changes to Px = 1. Now the optimal bundle for this consumer has units of X and units of Y. If the consumer wanted to achieve the same level of utility under the new prices as they had under the old prices, the optimal bundle would have units of X and units of Y. (Hint: this is the decomposition bundle) The substitution effect of this price change is units of + and the income effect is units of

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A consumer’s preferences over two goods x and y are given bythe utility function U(x, y) = xαyβ with α, β > 0. The prices of the goods are px = 2 and py = 4.The consumer has an income of I > 0.(a) For what values of α and β are these utility functions strictly monotone?(b) For what values of α and β will the consumer demand (i.e., Walrasian demand) be more x than y?(c) For what values of α and β are these goods gross substitutes? For what values of α and β are these goods gross complements? Provide a justification for your answer.
Question 14 Consider imperfect substitute goods. On a graph, we know that the optimal bundle is chosen where the indifference curve just touches the budget constraint (i.e., the IC is tangent to the BC). What else is true at the optimal bundle? Select all that apply. The consumer chooses a bundle where MRSxy = MRTxy. The consumer chooses a bundle where MUX/Px = MUy/Py. The consumer chooses a bundle where the marginal utility per dollar spent on each good is equal. The consumer chooses a bundle where the marginal utility is at it's highest for each good. The consumer chooses a bundle where price per unit is minimized. The consumer chooses a bundle where MUX/MUy is maximized.
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A student has a lunch utility function U(S, P) 8S + 3P, where S is number of salads per month and P is number of pizzas per month. The price of a salad is $5, the price of a pizza is 8, and his monthly income for lunch is $80. a) Derive the equation representing the consumer's demand for Salad. Represent the demand for Salad graphically. b) The price of Salad goes up to $25 and the price of Pizza does not change. Compute and represent graphically the new equilibrium of the student. What can you tell about the substitution effect on Salad and pizza
Jose has utility for UC Davis sporting events equal to U = S²B where S is the number of Soccer games and B is the number of baseball games. Baseball games cost $5 per game and Soccer games cost $10 per game. How many soccer games will Jose attend in his optimal bundle for ever baseball game? In other words, in his optimal bundle, S = xB. Second, if Jose has $90 to spend on sports, how many baseball games will he attend? In other words, Jose will attend baseball games in his optimal bundle. Third, if Jose's budget increases to $180, now how many baseball games will he attend? Jose will attend baseball games. Fourth, for Jose, is baseball a normal or inferior good? Enter the word "normal" or "inferior" here
Ricky has utility function u=x'y. This implies that MUx=2xy. MUy=x². His income is 100. The price of y is 10. (a) Find his demand for x at price 20. (b) Find his demand for x at price 30. (c) Write down his demand function for x: that is, write down his demand for x as a function of the price of x.