An individual utility function is given by U(x,y) = x·y. Derive this individual indirect utility function. Using this individual indirect utility function, compute her level of utility when I = $800, px = $20 and py = $40. It is equal to?

An individual utility function is given by U(x,y) = x·y. Derive this individual indirect utility function. Using this individual indirect utility function, compute her level of utility when I = $800, px = $20 and py = $40. It is equal to?

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter20: Consumer Choice: Maximizing Utility And Behavioral Economics

Section: Chapter Questions

Problem 1WNG

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1) An individual utility function is given by U(x,y) = x·y. Derive this individual indirect utility function. Using this individual indirect utility function, compute her level of utility when I = $800, px = $20 and py = $40. It is equal to 200 utils. 2) An individual utility function is given by U(x,y) = x·y. Let I = $800, px = $20 and py = $40. Suppose that a tax t of $10 per unit is imposed on good x. Assume that the full burden of this excise tax is borne by this consumer, i.e. the new price this individual faces for good x is p’x = px + t = $20+ $10 = $30. Use the indirect utility function you derived earlier to compute this person new utility level with this excise tax. It is equal to 133.33 utils. Question: An individual utility function is given by U(x,y) = x·y. Let I = $800, px = $20 and py = $40. Suppose that a tax t of $10 per unit is imposed on good x. Assume that the full burden of this excise tax is borne by this consumer, i.e. the new price this individual faces for…
Part 1) An individual utility function is given by U(x,y) = x·y. Derive this individual indirect utility function. Using this individual indirect utility function, compute her level of utility when I = $800, px = $20 and py = $40. It is equal to 200 utils. Part 2) An individual utility function is given by U(x,y) = x·y. Let I = $800, px = $20 and py = $40. Suppose that a tax t of $10 per unit is imposed on good x. Assume that the full burden of this excise tax is borne by this consumer, i.e. the new price this individual faces for good x is p’x = px + t = $20+ $10 = $30. Use the indirect utility function you derived earlier to compute this person new utility level with this excise tax. It is equal to 133.33 utils. Question: An individual utility function is given by U(x,y) = x·y. Let I = $800, px = $20 and py = $40. Suppose that a tax t of $10 per unit is imposed on good x. Assume that the full burden of this excise tax is borne by this consumer, i.e. the new price this individual…
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For each of the following utility functions get the marginal utility of consumption of each of the goods. 1/2 1/2 (a) u(a,b) = a b (b) u(x, y) = x³/4y1/4 (c) u(a, b) = n(a) + In(x) (d) u(x, y) = ln(x) + ln(y) (e) u(a, b) = 2xa +Xb
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Please answer sub-part d) of the question.
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