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A: Here in the question, it is asked about the perfect complement goods.
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A: please find the answer below
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A result of welfare economics is that the
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- Consider an economy with two goods only. Use Slutsky decomposition for good 2 (Δx2 = Δx2(s) + Δx2(I) ) to prove that if the price of good 1 decreases and good 2 is normal, then under what condition is good 2 still a gross substitute for good 1? Under what condition is good 2 a gross complement for good 1?Suppose two goods, X and Y, are perfect complements and U = MIN (X, Y). A consumer has $24 to spend. Initially, the price of each good is $2. If the price of good X falls to $1, how much of the total change in quantity demanded of good X is due to the income effect? (Hint: Sketch the graph.)What is the marginal rate of substitution (MRS) for the utility function U(x, y) = x° + yP? The marginal rate of substitution of good x for good y is MRS = (Note: Be sure to use the Greek letter rho provided in the tool palette in your response.)
- Two students, Nick and Sofia, are discussing normal and inferior goods. Nick says that if Frodo buys more beer when the price of beer goes up, then beer must be an inferior good for Frodo. If, on the other hand, he buys less beer when the price of beer goes up, then beer must be a normal good for Frodo. Sofia disagrees: "Normal and inferior goods are about income changes, not price changes. Therefore, we do not have enough information: beer could be an inferior or normal good in either of these cases." Do you agree or disagree? Carefully explain your point of view. Support your argument with graphs of income, substitution and total effects (please put beer on the horizontal axis and the other goods on the vertical axis). Please assume that Frodo's preferences over beer and other goods are strictly convex and satisfy "more is better" assumption.If the social welfare function produces concave social welfare indifference curves, social welfare can be increased by reallocating income between households if their marginal utilities of income differ. TRUE OR FALSEWhen the price of raspberries increases, consumers may switch to strawberries or blueberries. What effect is responsible for this switch? the complement effect the price effect the substitution effect the income effect
- (In this question we denote income by Y, not by W as in the lecture notes). The following figure shows the consumption of x and y for two market situations. The income effect of a change in price of x from px to px’ is? Negative and is dominated by the substitution effect. Positive and reinforces the substitution effect. Positive and dominates the substitution effect. Negative and dominates the substitution effect. Negative and reinforces the substitution effect.In economics, we assume that choices are based on desired outcomes. This concept is known as:Floyd's utility function is given by U(X,Y)=2XY. MUx=2Y and MUy-2X. The price of good X is Px=2, while the price of good Y is Py = 1. Floyd's income is 1,000. Which of the following is true given that the price of good X falls to 1? The substitution effect for good X results in an increase of X consumption by about 1,043 units and a decrease in Y consumption by about 14 units. The substitution effect for good X results in X consumption of about 250 units. The substitution effect for good X results in X consumption of about 500 units. The substitution effect for good X results in an increase of X consumption by about 250 units and no change in Y consumption.
- Suppose that after your income increases, you consume less fast food. This means: Fast food is considered an inferior good. Coke and Pepsi are substitutes. Coke and fried chicken are complements. None of the above.Which of the following are examples of inferior goods? Select the correct answer below: O Ramen Noodles O restaurant meals O vacations O designer clothesWhen the price of raspberries increases, consumers may switch to strawberries or blueberries. What effect is responsible for this switch?
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