A. Alice consumers two goods, x and y. Her utility function is U(x, y) = 10 ln(2x + 2y) + 2y. The prices for x and y are p and py (in dollars per unit), respectively. Alice has an income of m dollars. Find Alice's optimal bundle as a function of pa, Py, and m. [Hint: Be aware of corner solutions!] [Recall that MUx|(x,y) 10 10 (x+y) and MUy|(x,y) = +2.] (x+y) =

A. Alice consumers two goods, x and y. Her utility function is U(x, y) = 10 ln(2x + 2y) + 2y. The prices for x and y are p and py (in dollars per unit), respectively. Alice has an income of m dollars. Find Alice's optimal bundle as a function of pa, Py, and m. [Hint: Be aware of corner solutions!] [Recall that MUx|(x,y) 10 10 (x+y) and MUy|(x,y) = +2.] (x+y) =

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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jack consumes bananas and cheese. y units of cheese costs f(y) = ________ liras. Bananas have usual linear pricing with unit price of ____ liras per unit. jack has an income of ____ liras and his utility is U(x,y) = ____________, where x is banana consumption and y is cheese consumption. Fill in the blanks with suitable values and according to that values solve questions. a) Sketch jack’s budget curve. b) Calculate the amount of bananas and cheese jack demands at given pricing scheme and income.
Suppose that Lucy's quasilinear utility function is U=2(9₁) 0.5 +4₂₁ with p₁ = $4 and p₂ = $2 initially and p, increasing from $4 to $5. Compare her compensating variation (CV), equivalent variation (EV), and change in consumer surplus (ACS). Lucy's compensating variation (CV) is $0.20. (Enter your response rounded to two decimal places and include a minus sign if necessary.) Lucy's equivalent variation (EV) is $0.20. (Enter your response rounded to two decimal places and include a minus sign if necessary.)
A consumer has GH¢600 to spend on two commodities, A and B. Commodity A costs GH¢20 per unit and Commodity B costs GH¢30 per unit. Suppose that the utility derived by the consumer from x units of Commodity A, and y Commodity B is given by the Cobb-Douglas utility functionU (x, y) = 10x0.6y0.4a. How many units of each commodity should the consumer buy tomaximize utility?b. Is the budget constraint binding?
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A consumer's utility is given by U =Y+/X,with marginal utilities being MUx = , and MUy = 1. 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
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4. Use the following information to calculate Wren's optimal bundle and his resulting utility: IC:U(x,y) = x0.5, 0.5 Px = 1, Py = 4, m = 48
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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I. A)MRS=1/3, B)MRS=1/4, C)MRS=4/3, D)MRS=12 II. A)Rhea should buy more bread, less milk, B)Rhea should buy more milk, less bread, C) Rhea maximizes her utility at bundle A, so she should not change her consumptions of either good, D) Rhea cannot afford bundle A, so she should buy less of both goods III. A)Rhea's MRS at bundle A is greater than the price ratio (Pb/Pm), B)Changing her bundle moves Rhea to a higher indifference curve, C)The slope of the indifference curve (where bundle A is found) is not equal to the slope of Rhea's budget constraint, D)All of the above statements explain your answer to part II.
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