Assume that Kelly is a life cycle consumer and receives incomes of 20, 30, 45 and 0 in herfour period life. What is Kelly's marginal propensity to consume out of her new wealth(AC/AW) in the following situations: [Hint: Let AC be the the change in consumptioncompared to what she would have done before the inheritance changed her wealth AW].19. In period 2 following an unexpected inheritance of 10: (a) 0.25; (b) 0.33; (c) 0.75; (d)1.0;20. In period 3 following an expected lump sum payment from her trust fund of 15: (a) 0.33;(b) 0.75; (c) 0.45; (d) 0.50;21. What is her desired optimal consumption in period 3 with the anticipated trust fundgift of 15: (a) 20; (b) 30; (c) 27.50; (d) 22.50;22. In what period of her working life (Y > 0) would her marginal propensity to consumeout of an unexpected inheritance of 10 be the highest: (a) 1; (b) 2; (c) 3; (d) 4;

The objective of the question is to determine Kelly's marginal propensity to consume (MPC) in…

Answered: Assume that Kelly is a life cycle…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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4. P4: Functions of two or more independent variables a. An individual's utility function has the Cobb-Douglas form: U=X0.5y2 where U is an index of her utility and X and Y are the weekly quantities of the two goods consumed. Find the marginal utilities of the two goods. Does the consumer ever experience satiation with respect to either good? b. How does the marginal utility of each good vary as consumption of it increases with consumption of the other good held constant? What is the economic significance of the signs of these partial derivatives? c. By differentiation, show that the indifference curve is negatively sloped and convex in the KL plane. Give an economic interpretation to the slope and curvature of the indifference curve. Sketch the graph of the indifference curve. 5. P5: Lagrange Multiplier Method a. Consider the following utility function: U=X¹Y4, x, y> 0. Let Px = 2 and Py = 3 and M = 100. Find the utility-maximizing consumption bundle. b. Find the marginal utilities of…
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Can you please solve 8 e knowing that the awnser to 8 d is found written below. Please also see attached question Awnser to 8d: U = (X1)^(1/2)*(X2)^(1/3) We have budget constraint as, m = P1*X1+P2*X2 Let's set up the Lagrange maximizing function as below. L = U(X1, X2) - λλ(P1X1+P2X2-m) L = (X1)^(1/2)*(X2)^(1/3)- λλ(P1X1+P2X2-m) Finding first order condition, dL/dX1 = (0.5)*(X2)^(1/3)/(X1)^(1/2)-λλP1 dL/dX2 = (1/3)*(X1)^(1/2)/(X2)^(2/3)-λλP2 Equating these equations to zero to get, (0.5)*(X2)^(1/3)/(X1)^(1/2)-λλP1 = 0 (1/3)*(X1)^(1/2)/(X2)^(2/3)-λλP2 = 0 (0.5)*(X2)^(1/3)/(X1)^(1/2)/P1 = (1/3)*(X1)^(1/2)/(X2)^(2/3)/P2 (3/2)*(X2/X1) = P1/P2 X1 = (1.5P2*X2)/P1 dL/dλλ = P1X1+P2X2-m=0 P1X1+P2X2 = m P1*(1.5P2*X2)/P1+P2X2=m 2.5*P2X2=m X2 = 0.4*m/P2 X1 = 0.6*m/P1 Hence, Marshallian demand function for good q and good 2 respectively are X1 = 0.4*m/P1 X2 = 0.6*m/P2
Economics 10). Tyler has income of m1=10, this year and an income of m2=10,00 next year. Initially, when the interest rate is r=0, his budget constraint has a vertical intercept at (0, 20000) and a horizontal intercept at (20000, 0). If the interest rate were to increase to r=0.05, what is the only point that the old budget line and new budget line would share? a) (0,20000) b) (10000,10000) c) (20000,0) d) (20000,20000) e) (10500,10500)
(2) (a) Write out Ann's expenditure minimization problem for U(x, y) > Ū. (b) Write out the tangency condition for expenditure minimization. (You do not need to show your work.) How does it compare to the tangency condition in Part (1c) above. Explain (50 words or fewer.) (c) Now set, P₂ = 4 and Py = 2. Use the tangency condition and U(x, y) = Ū to solve for Ann's compensated demands as a function of U. (Normally, compensated demands are functions of Ū, PE, and Py. Here we have explicit values for the prices, and compensated demands will be a function of only Ū. It is worth noting that if a = 6³, then b = a) (d) Use your answer to Part c to write out Ann's expenditure function.
Consider an economy with two goods, consumption c and leisure 1, and a representative consumer. The consumer is endowed with 24 hours of time in a day. A consumer's daily leisure hours are equal to 1 = 24-h where h is the number of hours a day the consumer chooses to work. The price of consumption p is equal to 1 and the consumer's hourly wage is w. The consumer faces an ad valorem tax on their earnings of 7 percent. The con- sumer also receives some exogenous income Y that does not depend on how many hours she works (e.g. an inheritance). The consumer's preferences over consumption and hours of work can be represented by the utility function U(c, h) = c-3h¹+, where 3 > 0 and p > 0 are parameters. 1+p
January is choosing how much of pudding (measured on the horizontal axis) and how much of meat (measured on the vertical axis) to purchase with limited budget of $100. The price of pudding is $1.25 per pound and the price of meat is $3.75 per pound. Suppose the consumer wants to purchase the consumption bundle (20,40). This consumption bundle will be attainable O None of the other alternatives are correct O unattainable O efficient
Help me please
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Givens: mar T1 2 0, x2 > 0 s.t. 8* + 4* T2 <1600 • The marginal utility of good 1: MU = 25 • The marginal utility of good 2: MU, = .75 * Equation Description: A consumer is attempting to maximize utility subject to a budget constraint. Utility equals the product of two terms: the first term is units of good 1 raised to the .25 power; and, the second term is units of good 2 raised to the .75 power. The price per unit of good 1 is $8; the price per unit of good 2 is $4: and, consumer income is $1600. Marginal utility of good 1 equals the product of three terms: the first term is .25; the second term is units of good 2 raised to the !75 power; the third term is units of good 1 raised to the -75 power. Marginal utility of good 2 equals the product of three terms: the first term is .75: the second term is units of good 1 raised to the .25 power; the third term is units of good 2 raised to the -.25 power. Question: What is the highest level of utility the consumer can achieve? O 150 utils O…
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Katie Kwasi's utility function is U(x₁, x₂)=5(In x₁)+x₂. Given her current income and the current relative prices, she consumes 10 units of x₁ and 15 units of x₂. If her income doubles, while prices stay constant, how many units of x₁ will she consume after the change in income? a)10 b)20 c)15 d)5

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