Consider a consumer who consumes pizzas and soft drinks. The utility function is given by U (p, s) = pa. 8B, where p represents the quantity of pizzas consumed and S represents the quantity of soft drinks consumed, and a and B are positive constants representing the consumer's preferences for each good. Assume α = 2 and ẞ = 1. If the prices of pizzas and soft drinks are $10 and $2 respectively, and the consumer has $50 to spend, which of the following statements is wrong? The slope of the budget constraint indicates that for every extra soda drink the consumer buys, they must give up 5 pizzas. The slope of the budget constraint indicates that for every extra pizza that the

Consider a consumer who consumes pizzas and soft drinks. The utility function is given by U (p, s) = pa. 8B, where p represents the quantity of pizzas consumed and S represents the quantity of soft drinks consumed, and a and B are positive constants representing the consumer's preferences for each good. Assume α = 2 and ẞ = 1. If the prices of pizzas and soft drinks are $10 and $2 respectively, and the consumer has $50 to spend, which of the following statements is wrong? The slope of the budget constraint indicates that for every extra soda drink the consumer buys, they must give up 5 pizzas. The slope of the budget constraint indicates that for every extra pizza that the

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Consider two consumers, A and B, who consume two goods, x and y. Assume that the utility function for A is U₁ = A₁ and the utility function for B is UB = XBYB. Consumer A is endowed with 10 units of x an 10 units of y. Consumer B is endowed with 10 units of x and 40 units of y. Assume the price of y is set to $1. What is the expression for Consumer A's demand for x? XA 10p, +10 Pr 10p, +40 Pr 10pz +10 4pz 10p, +40 4pz
Consider the following utility function and budget constraint: U = (beer^.4)*(pizza ^.6) 50 = 2*pizza + 1* beer Suppose now the government places a 1 - dollar tax on beer. Given this information, find the optimal amount of beer to consume with the new tax.
Consider the following utility function and budget constraint: U = (beer^.4)*(pizza ^.6) 50 = 2*pizza + 1* beer Given this information, find the optimal amount of beer to consume. Hint: income is 50, the price of pizza is 2, and the price of beer is 1.
Rui's utility function is Let the price of good X be px, the price of good Z be normalized to $1.00, and U be her level of well-being. What is her expenditure function? Rui's expenditure function (E) is E = 2. U=X+4XZ+Z. PX(U+0.25) 2 - 0.25 (Px +1) · (Properly format your expression using the tools in the palette. Hover over tools to see keyboard shortcuts. E.g., a subscript can be created with the _ character.) Derive her unco pensated demand curve for X. Let Y be her income. Rui's uncompensated demand curve for good X is (Properly format your expression using the tools in the palette.) X=
Assume you consume two goods, X and Y. Your utility function is U = 2X + 4Y. Let PX= $4, PY= $2, and assume that your income is $100. What's your optimal consumption of Y?
Suppose a consumer’s utility function is u = x_1^(3/2) x_2^(3/2) . She spends her budget of £27 for two goods. The prices of both goods are p1 = 6 and p2 = 6 Now suppose that instead both goods are priced as follows: There is a discount of 50% on the price of good 1 on each additional unit in excess of 3 units, and there is a discount of 50% on the price of good 2 on each additional unit in excess of 3 units. Draw the new budget constraint and derive it analytically.
To reach consumer equilibrium, which of the following consumption choices must be made? The total utility per dollar spent on Good X must equal the total utility per dollar spent on Good Y. The total utility of Good X must equal the total utility of Good Y. The marginal utility of Good X must equal the marginal utility of Good Y. The marginal utility per dollar spent on Good X must equal the marginal utility per dollar spent on Good Y.
10
Suppose your utility for goods x1 and x2 is represented by the following utility function: U(x1,x2)= x11/5 x24/5 a) What is your marginal rate of substitution, MRS12? b) If the price for good x1 is p1 = 2, the price for good x2 is p2 = 4, and your available income is m = 20, write down your budget constraint. c) Using the prices and income given at b) above, find your optimal consumption choice bundle (Marshallian demand) and its corresponding utility level. d) Illustrate your optimal consumption choice on a graph. e) For the prices given in b), what income would you need to achieve a utility level of 25?
Bob views apples (a) and oranges (o) as perfect substitutes in his consumption. When we put apples on the horizontal axis and oranges on the vertical axis, MRSao = 0.5 for all combinations of the two goods in his indifference map. Suppose the price of apples is $2 per pound, the price of oranges is $3 per pound, and Bob's budget is $30 per week. Given Bob’s budget constraint, what is his utility maximizing choice?
For the utility function U = Qx0.28Q (1-0.28) and the budget 137 = 11Qx+6Qy find the CHANGE in optimal consumption of X if the price of X increases by a factor of 1.6. Please enter your response as a positive number with 1 decimal and 5/4 rounding (e.g. 1.15 = 1.2, 1.14 = 1.1).
A consumer has a utility function U(X,Y ) = X1/2 Y1/2 . Prices of the goods are pX = £10 and pY = £5, respectively, and the consumer has income M = £200 to spend on X and Y. Currently, she buys 2 units of good X and spends the rest of her income on good Y.a) Determine this consumer’s current utility level. b) Compute the consumer’s marginal utilities of goods X and Y. c) Explain why the consumer’s current consumption of goods X and Y is not optimal. Should she substitute X for Y or vice versa? The consumer’s marginal rate of substitution is MRS = Y/X.d) Determine this consumer’s optimal consumption of both goods. e) By how much does the consumer’s utility increase when she consumes the optimal bundle?