B. The indifference curves shown below are for Ali whose income per month is $1400. Using the information given in the graph below, answer the following questions: Good Y i. 1234 10 0 111. 10 14 Good X What are the conditions for consumer equilibrium in indifference curve analysis? 7 ii. What are the prices of goods Y and X when Ali is on lo, How much does Ali spend on good Y and good X respectively? What are the prices of goods Y and X when Ali is on ₁ Explain the changes that have happened that have caused Ali's indifference curve to move from Io to I₁. What are the quantities of X and Y do Ali purchase to maximise his utility? iv. Using the indifference curve analysis, derive the demand curve for good X. Total Product 0 C. What is free-rider problem and how does it cause underproduction of public goods in a competitive market? D. Complete the following short-run cost table using the information provided. 20 TFC AFC 12 TVC AVC 12 10 12 14 TC MC ATC

B. The indifference curves shown below are for Ali whose income per month is $1400. Using the information given in the graph below, answer the following questions: Good Y i. 1234 10 0 111. 10 14 Good X What are the conditions for consumer equilibrium in indifference curve analysis? 7 ii. What are the prices of goods Y and X when Ali is on lo, How much does Ali spend on good Y and good X respectively? What are the prices of goods Y and X when Ali is on ₁ Explain the changes that have happened that have caused Ali's indifference curve to move from Io to I₁. What are the quantities of X and Y do Ali purchase to maximise his utility? iv. Using the indifference curve analysis, derive the demand curve for good X. Total Product 0 C. What is free-rider problem and how does it cause underproduction of public goods in a competitive market? D. Complete the following short-run cost table using the information provided. 20 TFC AFC 12 TVC AVC 12 10 12 14 TC MC ATC

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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1. Consider two consumers, each having income of $300 that can be used to purchase two goods: X and Y. The price per unit of X is $5, and the price per unit of Y is $4. Ms. A’s preferences can be described by the utility function: U = (X^2)Y and her marginal rate of substitution is given by MRS X,Y = 2Y/X. Mr. B’s preferences can be described by the utility function: U = X(Y+100) and his marginal rate of substitution is given by MRS X,Y = (Y+100)/X. Calculate the amounts of X and Y each of these consumers will purchase if each is trying to make her- or himself as well off as possible.
Suppose John spends all income on video games and pizza. Suppose the price of video game decreases and John's income increases. Which of the following must be true? O The amount of pizza that John can purchase decreases. O The amount of video games that John can purchase decreases. The amount of video games that John can purchase decreases and the amount of pizza that John can purchase increases. O The amounts of video games and pizza that John can purchase increase.
4 .please show all calculations Draw a budget line with good X on the x-axis and Good Y on the Y axis. Graphically illustrate the effect of an increase in the price of good X on the utility maximizing quantity of X consumed. Make sure you identify the income effect and the substitution effect. Assume that the good is a normal good
Now suppose that income goes up to 15oo. Illustrate how the budget constraint will change. If both goods are normal, explain where the new equilibrium will be (your answer might consist of a region of bundles, rather than just one bundle).
4. For Henry, eggs are inferior but not Giffen. On Henry's indifference curve dia- gram, illustrate the income and substitution effects when the price of eggs goes up. How does your diagram illustrate that eggs are inferior? How does it illustrate that eggs are not Giffen?
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Using Figure explain why the point of tangency of the budget line with an indifference curve is the consumer’s equilibrium position. Explain why any point where the budget line intersects an indifference curve is not equilibrium. Explain: “The consumer is in equilibrium where MRS = PB/PA.”
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Problems 7 1 1 1 7 Marco's utility function is given by U= X³Y. MUx =X Ye, MUy =XY. 1. 8 Given Marco's utility function, does he prefer X or Y? Explain а. b. The price of X is $5, the price of Y is $10. and Marco's income is $160. Find his utility maximizing amount of X and Y.
3.5 Marginal Utility and Consumer Choice Participation Question 7: • A consumer derives utility from consuming integer units of Good X and Good Y. See the table below for a total utility level at different consumption levels. What is the marginal utility of the second unit of Good X when the consumption of Good Y is at 3? Total Utility 1 Good X 2 Good X 3 Good X 1 Good Y 1 8. 2 Good Y 8 10 3 Good Y 10 11 A. 10 В. 5 С. 3 D. 2
10. Assume an individual's preferences are represented by the following indifference map and he has an income of S400. Which of the following is shown when the price of Good I is $20 and the price of Good 2 increases from $10 to S16? Note: Even though the price of Good 2 is increasing, the steps to determine the income and substitution effects are the same. 50 45 40 35 30 25 20 15 10 10 15 20 25 30 35 40 45 50 Good 1 Good 2 is a normal good. Good 2 is an inferior good, but not a Giffen good. Good 2 does not satisfy the Law of Demand. • Ignoring the Income Effect, the Substitution Effect will cause the individual to consume more of Good I. A. B. 21 C. 3 None of the above statements are true. D. Good 2
Figure#1 Pepsi Z. W Pizza Refer to Figure# 1. Which point in the figure showing a consumerâ s budget constraint represents the consumer's income divided by the price of a Pepsi?