A1: PERFECT SUBSTITUTES..(a) Suppose we have preferences U(X, Y) = min[X, 3Y]. What is the utility at the bundle X = 10 andY = 10? Create a table then graph/sketch the indifference curve through (10, 10).(b) What do we mean by a composite good? What does this composite good look like with thesepreferences? Show and explain.(c) State the consumer's utility maximization problem and express this in words. Sketch this in afigure and explain.(d) Show that demands are: X = 3M/[3Px + Py] and Y = M/[3Px + Py]. Hint: use the compositegood from (b).(e) Let prices be Px = $5, Py = $3 and income M = $1000. What is optimal X, Y, and utility? Showyour work.(f) Suppose Px rises to $6 and Py falls to $2 but income stays at $1000. Calculate the CompensatingVariation that ensures the consumer is no worse off nor better off with these price changes.Show and explain your work.A2: RISK and INSURANCE...Consider the following FIRE-INSURANCE PROBLEM where fire partially destroys a $500 house.EVENTFIRENO FIREPROBABILITY OUTCOME INSURANCE PAYOUT$100$5000.020.98$4000PREMIUM????(a) What do we mean when we say an agent is Risk Averse?(b) Assume utility is U(x) = V(x). Why does this utility function imply the agent is risk-averse? Use afigure/diagram to explain.(c) What is the expected payoff and expected utility of having no insurance for this agent?(d) What do we mean by certainty equivalent? What is the certainty equivalent of no insurance?(e) What is the maximum the agent will pay for complete insurance that pays out $400 in the caseof fire? Show your work.(f) Suppose insurance is incomplete and only pays out $300 in case of fire. What is the maximumthe agent will pay for insurance now? Show your work and explain relative to (e). Note: I aminterested in your solution technique more than the answer. So show your thought process.

“Since you have posted a question with multiple sub-parts, we will solve first three subparts for…

A1: PERFECT SUBSTITUTES... (a) Suppose we have preferences U(X, Y) = min[X, 3Y]. What is the utility at the bundle X = 10 and Y = 10? Create a table then graph/sketch the indifference curve through (10, 10). (b) What do we mean by a composite good? What does this composite good look like with these preferences? Show and explain. (c) State the consumer's utility maximization problem and express this in words. Sketch this in a figure and explain.

A1: PERFECT SUBSTITUTES... (a) Suppose we have preferences U(X, Y) = min[X, 3Y]. What is the utility at the bundle X = 10 and Y = 10? Create a table then graph/sketch the indifference curve through (10, 10). (b) What do we mean by a composite good? What does this composite good look like with these preferences? Show and explain. (c) State the consumer's utility maximization problem and express this in words. Sketch this in a figure and explain.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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5) Consider indifference curves for the consumption of milk and chocolates (you may assume that both are 'goods'). The indifference curves are drawn with the number of chocolate bars on the horizontal axis and pints of milk on the vertical axis. Suppose that at every point, consumer A's indifference curve is flatter than consumer B's. What can you conclude about consumers A and B tastes and preferences?
solve d,e,f please Thank you
4. Suppose the consumer's utility u: X → R is strictly conver-i.e. such that any x, y EX with ry and any 0 u(λx + (1 − A)y). (a) Show that the consumer will do one of the following: . Buy nothing. . Spend all their money on good 1. • Spend all their money on good 2. [Hint: The previous question could be helpful.] (b) Suppose that, in addition to behig strictly convex, u is increasing. Explain why the consumer will spend all their money on one good.
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6 If someone has an income of 20 and he wants to buy Pepsi and hamburgers. Hamburgers are sold in an unusual way. There is only one supplier and the more hamburgers he buys, the higher the price per unit. So, hamburgers cost is a total of 2h^2 (squared) for hamburgers. Pepsi is sold at a price of $2. 1. In this case, write out the budget constraint of hamburgers and Pepsi. 2. His utility function is u(h,p) = 12h + 4p. Draw his 1) budget line and 2) a few indifference curves on a graph. 3. What is the optimal bundle for him?
Letter B. Only.
Subpart 7 only
15. Higher Indifference curve means: (a) Consumer has more income (b) Price of goods have reduced (d) All of the above (c) Higher utility level
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c only please
12) A consumer’s preferences are given by U(X,Y) = X0.6Y0.4. The price of X is 4, and the price of Y is 5. The consumer has an income of $2000.a) What is the utility maximizing choice of X and Y?b) How would the utility maximizing choice change if price of X falls to 3 because of a pricesubsidy?c) Given the answers to the previous parts plot a linear demand function for X.d) Show that the consumer would prefer the cash equivalent of the price subsidy in part b.