Consider the following situations. In the table, (px, Py, M) describes the prices andincome and (x, y) describes the chosen bundle under those prices and income.Situation Prices and Income123(2,4,10)(1,8,5)(4,2,6)Chosen bundleA = (1,2)B = (1,0.5)C = (1,1)Which bundles amongst the 3 chosen ones is A directly revealed preferred to?Which bundles amongst the 3 chosen ones is B directly revealed preferred to?Which bundles amongst the 3 chosen ones is C directly revealed preferred to?Do these choices satisfy the weak axiom of revealed preference?The solution of questions (a) (b) (c) are given as follows,please just solvefor question (d)!! (Thanks very much)Part AConsumer purchased bundle A (1,2) with the budget of (2,4,10) => Total spending = 1*2 +2*4=10Lets check whether with the same budget, bundle B & C are affordable or notBundle B (1,0.5) => Total spending = 1*2 +0.5*4=2+2=4Bundle C (1,1) => Total spending = 2*1 +4*1=2+4= 6Hence when consumer purchased the bundle A then within the same budget bundle B & C wereaffordable => A is directly revealed preferred to B & CPart BConsumer purchased bundle B (1,0.5) with the budget of (1,8,5) => Total spending=1*1 +8*0.5=5Lets check whether with the same budget, bundle A & C are affordable or notBundle A (1,2)=> Total spending = 1*1 +8*2= 1+16=17Bundle C (1,1) => Total spending = 1*1 +8*1=1+8=9Hence when consumer purchased the bundle B then within the same budget bundle A & C wereunaffordable => B is not directly revealed preferred to A & CPart CConsumer purchased bundle C (1,1) with the budget of (4,2,6)=> Total spending=4*1 +2*1=6Lets check whether with the same budget, bundle A & C are affordable or notBundle A (1,2)=> Total spending=4*1 +2*2=4+4=8Bundle B (1,0.5) => Total spending = 4*1 + 2*0.5=4+1=5Hence when consumer purchased the bundle C then within the same budget bundle A wasunaffordable whereas B was affordable => C is revealed preferred to B

The axiom that depicts that individuals choose what they prefer and the preferences are always…

Consider the following situations. In the table, (px. Py, M) describes the prices and income and (x, y) describes the chosen bundle under those prices and income. Situation Prices and Income Chosen bundle A = (1,2) B=(1,0.5) C = (1,1) 1 2 3 (2,4,10) (1,8,5) (4,2,6) Which bundles amongst the 3 chosen ones is A directly revealed preferred to? Which bundles amongst the 3 chosen ones is B directly revealed preferred to? Which bundles amongst the 3 chosen ones is C directly revealed preferred to? Do these choices satisfy the weak axiom of revealed preference? The solution of questions (a) (b) (c) are given as follows,please just solve for question (d)!! (Thanks very much)

Consider the following situations. In the table, (px. Py, M) describes the prices and income and (x, y) describes the chosen bundle under those prices and income. Situation Prices and Income Chosen bundle A = (1,2) B=(1,0.5) C = (1,1) 1 2 3 (2,4,10) (1,8,5) (4,2,6) Which bundles amongst the 3 chosen ones is A directly revealed preferred to? Which bundles amongst the 3 chosen ones is B directly revealed preferred to? Which bundles amongst the 3 chosen ones is C directly revealed preferred to? Do these choices satisfy the weak axiom of revealed preference? The solution of questions (a) (b) (c) are given as follows,please just solve for question (d)!! (Thanks very much)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A consumer has preferences over bundles of two goods with indifference curves defined by X2 = for k>0. (a) Find a utility function representing these preferences assuming that the consumer's pref- erences are monotone. (b) Give an example of a utility function representing non-monotone preferences with the same indifference curves. (c) Show that indifference curves of the form x2 = x + k for k € R cannot arise from monotone preferences.
3. Let there be two goods x and y with prices px and py respectively, and let M be the consumer's income. Let the consumer's preferences be represented by the utility function min(2x, y). Find the consumer's expenditure function. Note: you cannot use the Lagrange method as the utility function is not differentiable - but you have used the min U = utility function before. (4)
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A consumer’s preferences over pizza (x) and steak (y) are given by u(x,y) = x2y (HINT: MUx = 2xy and MUy = x2) and his income is I = $120 and py = $1. (a) Calculate his optimal bundle when pX = $8 (call this bundle A) and separately when pX = $1 (call this point C). (b) Finding the decomposition bundle B, calculate the income and substitution effects on the amount of pizza of a decrease in the price of pizza from pX = $8 down to pX = $1. (c) Forget about the decomposition bundle and the two effects. In (a), the price of pizza decreases, hence the agent ends up better off. Let’s quantify how much “better off” the agent becomes after this price drop, in dollars. For this, instead of the price drop, suppose the agent is given some money $m and he optimize utility with this additional gift included to his budget. What should m be, so that his optimal utility with his expanded budget is exactly equal to his utility at the bundle C (the bundle he chooses optimally when pizza price drops to…
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