Economics2a-c answer ++++ratingA consumer is initially at point A on her originalbudget constraint (the thin solid line with theXintercept and Y-intercept labeled). Sheexperiences a change in her budget constraint andis now at point B. Her new budget constraint isshown by the dotted line.C2[(Y1 + Aj)(1+r) +Y2]/PzU2[Y, + A, + (Y2/(1+r))]/PelC,a. What appears to have been the cause of thechange in her budget constraint?b. Is the substitution effect positive or negative?Show this effect(draw an arrow on the graph).c. Is the income effect positive or negative?Show this effect(draw an arrow on the graph).

Budget (B) constraint (C) is the quantity (Q) of the goods that the consumer (c) can purchase with…

Economics 2a-c answer ++++rating A consumer is initially at point A on her original budget constraint (the thin solid line with the Xintercept and Y-intercept labeled). She experiences a change in her budget constraint and is now at point B. Her new budget constraint is shown by the dotted line. [(Y₁ + A₁)(1+1) + Y2]/Pc2 U₂ U₁ [Y₁ + A₁ + (Y₂/(1+r))]/Pel C1BC1C1a C₁ a. What appears to have been the cause of the change in her budget constraint? b. Is the substitution effect positive or negative? (draw an arrow on the graph). Show this effect c. Is the income effect positive or negative? (draw an arrow on the graph). Show this effect

Economics 2a-c answer ++++rating A consumer is initially at point A on her original budget constraint (the thin solid line with the Xintercept and Y-intercept labeled). She experiences a change in her budget constraint and is now at point B. Her new budget constraint is shown by the dotted line. [(Y₁ + A₁)(1+1) + Y2]/Pc2 U₂ U₁ [Y₁ + A₁ + (Y₂/(1+r))]/Pel C1BC1C1a C₁ a. What appears to have been the cause of the change in her budget constraint? b. Is the substitution effect positive or negative? (draw an arrow on the graph). Show this effect c. Is the income effect positive or negative? (draw an arrow on the graph). Show this effect

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

q18- Which of the following statements about the budget constraint is true? The slope of the budget constraint is: (i) the rate at which a consumer can trade one good for another (ii) equal to the slope of the highest indifference curve (iii) constant Select one: a. (i) and (ii) b. (i) and (iii) c. (ii) and (iii) d. (i) only Clear my choice
2) A consumer’s utility function is: U(x,y) = sqrt(9xy). The price of each good is: (PX,PY) = (15,20). The monthly budget is: M = 600, answer the following:a. What is the optimal bundle (X, Y) that maximizes the consumer’s utility?b. What is the optimal utility given your answer from part a?c. If the desired level of utility the consumer is U = 400, what would be the optimal bundle (X, Y) to minimize consumer expenses?d. Given U = 400 from part c, what would be the new optimal bundle for both goods if PX increases to 25?e. Given the price increase in good X from part d, what would be the optimal bundle for this consumer wishing to maximize its utility with an income, M = 600?f.: Graph the budget line and utility curve from part a i need help on part c
2. Consider a consumer whose preference relation over the consumption set X = R can be repre- sented by the utility function: u (x1, x2, 13) = A (x1 – T1)ª (x2 – ã2)° (x3 – ã3)" - where A, a, B and y are all strictly positive. (a) Why can you assume A = 1 and a + B+y= 1 without loss of generality? Do so for the rest of the question. (b) Solve the UMP and derive the consumer's Walrasian demand. (c) Find the indirect utility function, the minimum expenditure function, and the Hicksian demand function.
2 3) For each utility function, determine the marginal utility with respect to x, marginal utility with respect to y, and the MRS. (3pts each) a) U(x, y)-3x+2y b) U(x, y) 10x¹/5 y c) U(x, y)=x+ y²
Please help me to solve the questions below.
A4
4 Part Question on Caesar * * PART 1 * * Caesar has preferences that are described by the utility function u = 3x 1 + 5x 2. Caesar strictly prefers the bundle (x 1, x 2) = (0, 6.6) to the bundle A. (3, 3) B. (5, 3.6) C. (0, 8.4) D. (11, 1.8) E. (8, 3.60) * * PART 2 * * What is the functional form of Caesar’s preferences, or indifference curves? A. Linear (perfect substitutes) B. Leontief (perfect complements) C. Satiation D. Concave, but not strictly concave E. Cobb-Douglas * * PART 3 * * Caesar’s preferences are A. strictly convex. B. definitely not well-behaved. C. definitely well-behaved. D. strictly concave. E. neutral. * * PART 4 * * Caesar has been consuming the bundle (x 1, x 2) = (10, 2.4). At this point, what is the marginal rate of substitution? A. – 0.25 B. –0.6 C. – 1.67 D. – 3.0 E. – 5.0.
Don't use pen or paper
(a) Suppose we have preferences U(X, Y) = min [X, 3Y]. Graph/sketch the indifference curve through the bundle (X = 30, Y = 30). What is the utility of (30, 30) and explain why the indifference curves look the way they do. (b) What does the Marginal Rate of Substitution tell us about preferences? < (c) Why is the Marginal Rate of Substitution not applicable in this example? < (d) What do we mean by a composite good? What does this composite good look like with these preferences? Show and explain.< (e) State the consumer's maximization problem and express this in words.< (f) Now let Px = 10, Px= 20 and income M = 2000. Find optimal X*, Y*, and the resulting Utility (U*). Show your work. < (g) Now let Py = 15. How does optimal consumption (X*.Y*) and utility (U*) change relative to (e)? Explain in simple terms and show in a diagram.<
2. Sally consumes two goods, X and Y. Her utility function is given by the expression U = 3XY². The current market price for X is £10, while the market price for Y is £5. Sally's current in come is £500. (a) Sketch a set of two indifference curves for Sally in her consumption of X and Y. (b) Write the expression for Sally's budget constraint. Graph the budget constraint and determine its slope. (c) Determine the X,Y combination which maximises Sally's utility, given her budget constraint. (d) Calculate the impact on Sally's optimum market basket of an increase in the price of X to $15. What will happen to her utility as a result of the price increase?
21. A consumer has a utility function defined over two goods X and Y. Let the quantity of Good X be x ≥ 0 and the quantity of Good Y be y ≥ 0. The utility function is given below: u(x, y) = xy + 2y. Assume that the consumer has income m and that prices are på and py. (a) Explain whether the preferences underlying this utility function satisfy completeness and transitivity. (b) Explain whether the preferences underlying this utility function satisfy monotonicity and convexity. (c) Find the consumer's Marshallian demands for Good X and Good Y at prices px > 0 and Py > 0. (d) Show that goods X and Y are normal goods and explain whether either good is a substitute for the other. (e) Assume that px 10, Py = 5 and m = 100. Suppose that px increases to px = 15, how much of the change in demand for Good X is via the substitution effect and how much is via the income effect? Note: You may assume an interior solution (i.e. x > 0 and y> 0). =
1. Draw the Budget Line (BL) for products A and B, where product A is on the horizontal axis. Show in the picture what will happen to your BL (BL1) if one of the following happens (always starting from BL1): a. If the price of A drops by half (BL2) b. If the price of B increases 100% (BL3) c. If the new income is twice the old one (BL4)