Diogo has a utility function,0.2. 0.8U(q,, 42)=q,42°where g, is chocolate candy and g, is slices of pie. If the price of slices of pie, p2, is $1.00, the price of chocolate candy, P4, is $0.50, and income, Y, is $100, what isDiogo's optimal bundle?The optimal value of good q, is9, = units. (Enter your response rounded to two decimal places.)15tvMacBook Air80escDIIF1F2F3F4F5F7F8@23%&1234679QWERYtabSFHK.s lockXCVMcontroloptioncommand* CO8 :BDNA

Optimal condition is that condition where MRS is equal to price ratio.

Answered: Diogo has a utility function, U(a,, 92)…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose Alex’s utility function for apple and orange is U(a,o) = a^2o. The price of an apple is $ 4, and the price of an orange is $ 2. Alex has $ 120 to spend on these two goods. – at the bundle (a,o) = (4,2) the marginal rate of substitution MRS(a,o) = ____ – Given prices, income, and utility function, the best affordable bundle for Alex is a∗ = __ and o∗ = __
Diogo has a utility function, 0.2, 0.8 where g, is chocolate candy and g, is slices of pie. If the price of slices of pie, p2, is $1.00, the price of chocolate candy, p.. is $0.50, and income, Y, is $100, what is Diogo's optimal bundle? The optimal value of good q, is 9, = units. (Enter your response rounded to two decimal places.) Cha 15 tv MacBook Air 80 esc DD F1 F2 F3 F4 F5 F6 F7 F8 F9 ! @ 23 $ % & 3 4 7 8 Q W E R T Y tab A S F G J caps lock Z C V B mift fn control option command つエく6 ピ

The price of salad is ps = 10, the price of green juice is pg = 5, and Tom’s income is I = 100.
A consumer’s preferences over pizza (x) and steak (y) are given by u(x,y) = x^2y (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…
A student has a lunch utility function U(S, P) 8S + 3P, where S is number of salads per month and P is number of pizzas per month. The price of a salad is $5, the price of a pizza is 8, and his monthly income for lunch is $80. a) Derive the equation representing the consumer's demand for Salad. Represent the demand for Salad graphically. b) The price of Salad goes up to $25 and the price of Pizza does not change. Compute and represent graphically the new equilibrium of the student. What can you tell about the substitution effect on Salad and pizza
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