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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Consider the following utility function и(х, у) %3 3х + 4y a. Is the utility function homothetic? Explain. b. Under what condition will the consumer purchase good x alone?
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
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In two commodities world, utility function for a consumer and her income are given respectively. 11 U = x2y2 I= 480 If the price of these goods are Px= 15 and P, = 60 what would be her demand for these two goods * =? and y =? If the price of first good P has increased from 15 to 60. To keep her utility fixed how much does she need to spend for these two goods at least. In other words what should be her minimum income.
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Consider a consumer with preferences over two goods X (represented on the horizontal axis) and Y (repre- sented on the vertical axis). Assume that the consumer's indifference curves are strictly convex to the origin. The consumer's income equals $20, px = $2, and py = $4. At the bundle (x = 4, y = 3), the absolute value of the consumer's MRS (the marginal rate of substitution of good Y for good X) equals 1. Select the correct answer from the options below. O To maximize utility the consumer should buy less of good X and more of good Y. To maximize utility the consumer should buy more of good X and less of good Y. O The bundle x=4 and y=3 maximizes the consumer's utility.