Charles lives in New York City and loves to eat desserts. He spends his entire weekly allowance on jello and pie. A bowl of jello is priced at $1.25, anda piece of pumpkin pie is priced at $5.00. At his current consumption point, Charles's marginal rate of substitution (MRS) of jello for pie is 3. Thismeans that Charles is willing to trade three bowls of jello per week for one piece of pie per week.Does Charles's current bundle maximize his utility-in other words, make him as well off as possible? If not, how should he change it to maximize hisutility?Charles could increase his utility by buying more jello and less pie per week.O Charles could increase his utility by buying less jello and more pie per week.Charles's current bundle maximizes his utility, and he should keep it unchanged.

The utility is maximum at the marginal utility per dollar is equal and in other words, the MRS is…

Answered: Charles lives in New York City and…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The price of a good changes. How could you calculate how much income the consumer would have to lose at the old prices to be as well off as they are at the new prices (equivalent variation)? Calculate the value of the expenditure function at the new prices and original utility minus the expenditure function at the original prices and original utility Calculate the value of the expenditure function at the new prices and new utility minus the expenditure function at the original prices and original utility Calculate the value of the expenditure function at the original prices and new utility minus the expenditure function at the original prices and original utility Calculate the value of the expenditure function at the original prices and original utility minus the expenditure function at the original prices and new utility Which of the following is NOT a good way to measure a change in consumer welfare from a price change? Find the equivalent variation Find the change in the value of…
Matt has $14 in income that he devotes entirely towards caffeine purchases, specifically coffee and tea. Tea costs $4/cup and coffee costs $5/cup. Also, tea is subject to a quantity tax of $1/cup, and coffee is subject to a value tax of 0%. By how much will the slope of Matt's budget constraint change if his income were to increase from $14 to $37?
Matt has $13 in income that he devotes entirely towards caffeine purchases, specifically coffee and tea. Tea costs $2/cup and coffee costs $3/cup. Also, tea is subject to a quantity tax of $4/cup, and coffee is subject to a value tax of 0%. By how much will the slope of Matt's budget constraint change if his income were to increase from $13 to $40?
pats >125 per week to spend on peanut butter and carrots in the fixed ratio of 1 pound of peanut butter to 4 pounds of carrots. Peanut butter costs $1 per pound and carrots cost $0.5 per pound Suppose the price of carrots were to rise from $05 to $1 per pound. By how much will Tom have to reduce his consumption of carrots
Alice receives an allowance of 500 dollars that she spends on buying snacks (S) and tea (T). The price of each snack is 10 dollars and the price of each tea is 5 dollars. Her utility is given by: U (S, T) = 2S³/4 +T3/4 (a) Find her marginal rate of substitution (MRS) between S and T. (b) Write Alice's budget constraint. (c) Find Alice's optimal consumption and the optimal A. (d) What is her new consumption if the price of tea becomes 10 dollars? Note: numeric solutions for questions (c) and (d) are not integers.
Madison has set aside $24 for her snack budget this month. Her favorite snacks are ice cream and chips. The price of a pint of ice cream is $4 and the price of a bag of chips is $3. She currently consumes three pints of ice cream and four bags of chips each month. If the price of a pint of ice cream drops to $3, the income effect predicts that Madison will consume: more ice cream and more chips. equal amounts of ice cream and chips. more ice cream and fewer chips. less ice cream and more chips.
Mika earns $235 per week which she spends entirely at the grocery store, purchasing either food or alcohol The price of food is $1/unit, while the price of alcohol is $7/unit. If Mika recnives an additional $76/week in food stamps that can only be used to buy food at the grocery store so, this money could be used to buy food but NOT alcohol), what is the slope of Mka's budget constraint at the point where the constraint intenects the horizontalaxis, were she to graph quantity of food on the horizontal axis and quantity of alcohol on the vertical axis? (Note: The anawer may not be a whole rumber, so round to the nearest hundredth) (Note The numbers may change between questions, so read carefully
Nick has $300 a month to spend on either detailing his sports car or buying bottles of good wine. It costs $100 to have his car detailed and a bottle of wine is $50. He currently buys four bottles of wine each month and has his car detailed once. If the price of car detailing decreases to $75, Nick's budget constraint will:
Question 4 Naomi's expenditure function defined for a month for two commodities, Cassava (Q₁) and Banana (Q₂) is given by: 1. 11. Where P₁ is the price of Cassava (P₁>0), P2 is the price of banana (P₂ >0) and U is the fixed utility. The income of Naomi is m, where m > 0. Derive the indirect utility function for Naomi (Hint: Use the duality conditions) Using the Shephard's Lemma condition, derive Naomi's Hicksian demand function for Cassava (Q₁). iii. H IV. [125P,PU3 8 Using the Roy's identity, derive Naomi's Marshallian demand function for Banana (Q₂). Using the answer in (i), evaluate Naomi's maximum utility level when the price per tuber of Cassava is 5 cedis, the price per finger of banana is 10 cedis and her income is 250 cedis.
Gabriel has a weekly income (N) of $50, which he uses to purchase cupcakes (C) and tea (7). The price of a cupcake is $1, and the price of tea is $2.50. Suppose Gabriel's income increases to $100, and the prices of both cupcakes and tea remain unchanged. Given this income change, one would expect Gabriel's budget line to: O shift to the right. shift to the left. rotate around the tea axis point. not be affected.

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