Consider an individual, Maya, with the following preferences over the goods X and Y : u(x, y) = 2x2 + 3y2 , where x and y are the amounts of goods consumed. Suppose the initial prices of the two goods are px = 3 and py = 5 respectively and the individual has 120 rupees to spend on those two goods. (a.) Draw a few sample indifference curves and briefly mention- using the shape- the properties these level sets exhibit. (b.) Draw the budget line and write- in a few lines- what the slope of the budget line exhibit. (c.) Find the initial equilibrium choice and the condition that is satisfies at the equilibrium point. Briefly explain your findings. Suppose the price of the good X increases to 6, keeping the price of Y and income unchanged.
Marginal Rate of Technical Substitution
MRTS reaches a manufacturer when a part of the product is lowered to sustain the manufacturing level when the other part is extended. It is the level of the quantity that is lowered when one extra volume is used, and the output is unchanged.
Preferences and Utility Analysis
Before understanding what is preference and utility analysis, it is very important to understand the terms preference and utility separately.
Consider an individual, Maya, with the following preferences over the goods X and Y : u(x, y) = 2x2 + 3y2 , where x and y are the amounts of goods consumed. Suppose the initial prices of the two goods are px = 3 and py = 5 respectively and the individual has 120 rupees to spend on those two goods.
(a.) Draw a few sample indifference
(b.) Draw the budget line and write- in a few lines- what the slope of the budget line exhibit.
(c.) Find the initial equilibrium choice and the condition that is satisfies at the equilibrium point. Briefly explain your findings. Suppose the
(d.) Find the new equilibrium and the extent of change in consumption combination due to the p pricechange.
(e.) Decompose the total price effects into substitution and income effects. Briefly explain your findings.
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