Answered: a. Explain why indifference curves…

a. Explain why indifference curves cannot slope upwards. b. Show a map of indifference curves for goods x and y, which are perfect substitutes. Give an example of such goods.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter3: Preferences And Utility

Section: Chapter Questions

Problem 3.4P

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1. a) Explain the nature of an indifference curve map, making reference to the graph below. QUANTITY (APPLES) 11 12 13 B QUANTITY (ORANGES) b) Show on the graph how a consumer could reach an equilibrium at point A with a given budget constraint. c) Show on the graph how this equilibrium would change if the price of oranges decreased. d) Identify on the graph the income and substitution effects of the price change, and explain the nature of these effects.
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2. Sally consumes two goods, X and Y. Her utility function is given by the expression U = 3XY². The current market price for X is £10, while the market price for Y is £5. Sally's current in come is £500. (a) Sketch a set of two indifference curves for Sally in her consumption of X and Y. (b) Write the expression for Sally's budget constraint. Graph the budget constraint and determine its slope. (c) Determine the X,Y combination which maximises Sally's utility, given her budget constraint. (d) Calculate the impact on Sally's optimum market basket of an increase in the price of X to $15. What will happen to her utility as a result of the price increase?
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2. Sally consumes two goods, X and Y. Her utility function is given by the expression U = 3XY². The current market price for X is £10, while the market price for Y is £5. Sally's current income is £500. (a) Sketch a set of two indifference curves for Sally in her consumption of X and Y. (b) Write the expression for Sally's budget constraint. Graph the budget constraint and determine its slope. (c) Determine the X, Y combination which maximises Sally's utility, given her budget constraint. (d) Calculate the impact on Sally's optimum market basket of an increase in the price of X to $15. What will happen to her utility as a result of the price increase?
Page of 3 > Due November 1, 2 Press Esc to exit full screen A. Jack enjoys a cup of cappuccino every morning, which is made with equal parts of steamed milk (m) and espresso(e). Suppose Jack's utility function U(m, e) = min(m, e). Graph Jack's indifference curves when U = 4 and U = 8. B. Leslie buys 2 goods: z and y. His utility function is U(z,y) = 5x+3y. 1. Plot this consumer's indifference curves when U = 15 and U = 20. What is the shape of Leslie's indifference curves? 3. For Leslie, how are these two goods related? C. Leslie's friend Tim has a different utility function for the same goods U(x, y) = √zy. 1. Plot this consumer's indifference curves when U = 15 and Ū = 20. 2. What is the shape of Tim's indifference curves? D. A consumer's utility function for goods 2 and y is U(z,y) = x+2y. 2. 1. Calculate the consumer's marginal utility for each good at (2,2) (Hint: marginal utility represents the amount of utility the consumer gains by consuming one more unit of this good. You can…
You are choosing between two goods, X and Y, and your marginal utility from each is shown in the following table. Units of X MUX Units of Y MU 1 20 16 14 16 3. 12 3. 12 4 8. 4. 10 6. 4. 8. 6. 6. Instructions: Enter your answers as a whole number. a. If your income is $18.00 and the prices of X and Y are $4.00 and $2.00, respectively, what quantities of each will you purchase to maximize utility? units of X and units of Y b. What total utility will you realize? utils
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