Fill in the Blanks Type your answers in all of the blanks and submit X₂ Xº Ω· Assume you consume goods P and Q and your preferences are to consume the goods in a ratio of 3:2. 3 units of P for every 2 units of Q. Your income is $280 and initially the price of P is $20 and the price of Q is $12. Over time the price of P falls to $10 while the price of Q remains constant. Before the price change you will consume the price change you will consume 10 You are incorrect 7.4 You are incorrect X units of P. X units of P and after

Fill in the Blanks Type your answers in all of the blanks and submit X₂ Xº Ω· Assume you consume goods P and Q and your preferences are to consume the goods in a ratio of 3:2. 3 units of P for every 2 units of Q. Your income is $280 and initially the price of P is $20 and the price of Q is $12. Over time the price of P falls to $10 while the price of Q remains constant. Before the price change you will consume the price change you will consume 10 You are incorrect 7.4 You are incorrect X units of P. X units of P and after

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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b) As in question 2a, A consumer has a utility function given by U = x°.25 y0.75 and has an income of £100, the price of good x is £5 and the price of good y is £10. Suppose the price of good y falls from £10 to £5. By how much does the demand for good y fall and how much of the resulting change in demand for good y is due to the substitution effect and how much is due to the income effect? Take a picture of your diagrams and upload with your answer
Please provide full derivation, and 5. Casper consumes cocoa and cheese. Cocoa is sold in an unusual way. There is only one supplier, and the more cocoa you buy from him, the higher the price you have to pay per unit. In fact y units of cocoa will cost Casper y2 dollars. Cheese is sold in the usual way at a price of 2 dollars per unit. Casper's income is 20 dollars and his utility function is U(x, y)=x+2y, where x is his consumption of cheese and y is his consumption of cocoa. a. Sketch Casper's budget set and shade it in. b Sketch some of his indifference curves and label the point that he chooses. c. Calculate the amount of cheese and the amount of cocoa that Casper demands at these prices and this income.
Explain whether the following statement is true, false, or uncertain. A consumer consumes two categories of goods x and y. If an increase in the price of y does not increase the consumer's consumption of x, then this consumer must consider x to be an inferior good.
Smith and Jones are stranded on a desert island. Each has in her possession some slices of ham (H) and cheese (C). Smith prefers to consume ham and cheese in the fixed proportion of 2 slices of cheese to each slice of ham. Her utility function is given by Us = min(10H, 5C). Jones, on the other hand, regards ham and cheese as substitutes – she is always willing to trade 3 slices of ham for 4 slices of cheese, and her utility function is given by UJ = 4H + 3C. Total endowments are 100 slices of ham and 200 slices of cheese. a. Draw the Edgeworth Box diagram for all possible exchanges in this situation. What is the contract curve for this exchange economy? b. Suppose Smith’s initial endowment is 40 slices of ham and 80 slices of cheese (Jones has the remaining ham and cheese as her initial endowment). What mutually beneficial trades are possible in this economy and what utility levels will Smith and Jones enjoy from such trades? c. Now imagine a new endowment in which Smith has 60 slices…
Cobb-Douglas Preferences] Asad lives in a world with two goods (N=2), apples and bananas. He has a Cobb-Douglas utility function over these goods U(a, b) = a 0.7 b 0.3 . Asad has an income I = 200, and faces prices pa = 2, pb = 1 (a) We know that if Asad is optimizing (and consumes a bundle that contains both apples and bananas), that the slope of the budget constraint should be equal to his MRS. Use this and his budget constraint to solve for his optimal bundle. (b) Suppose the price of apples rises to 4, and the price of bananas rises to 3. What is his new optimal consumption bundle? (c) Suppose Asad instead had a utility function given by U(a, b) = a 1.4 b 0.6 + 1. Given the same prices and income as in part (b), what is his optimal bundle?
Consider a person who consumes two goods, x and y, and has a utility function given by U(x, y) = In(x)+y. This person has an income of $100 and faces a price of $0.50 for good x and $1 for good y. Price of x then rises to $0.60. Solve for the compensating variation (CV) and equivalent variation (EV) of this price change. Show your work.
The price of good "a" is $5 and the price of good "b" is $15. If the marginal utility of good "a" is 20 then the marginal utility of good "b" must be ________ to have an optimum combination of goods purchased. 80 20 60 4
Suppose a consumer has income of 1000, and buys pizza and coke. The price of pizza is 100 and price of coke is 50. Draw a budget line that represents the set of bundles this individual can afford if they use all their income. (Put movies on the X axis). Label the places where the budget line intercepts each axis and the slope of the line. Suppose that in consumer equilibrium this individual consumes 7 pizza and 6 coke. What rules must hold in consumer equilibrium? Label this bundle in your drawing (call it point “A”). Draw an indifference curve associated with this bundle, and explain how its slope at the equilibrium point relates to the slope of the budget line. Consider the bundle 2 pizza and 8 coke. Label this point. What can you say about the slope of the indifference curve that passes through the point? (For example, is it bigger than, equal to, or smaller than -1?) Now suppose that income goes up to 15oo. Illustrate how the budget constraint will change. If both goods are…
1.2 Ann and Bob each own 10 bottles of beer and, altogether, they own 20 bags of peanuts. There are no other people and no other goods in the economy, and no production of either good is possible. Using a to denote bottles of beer and y to denote bags of peanuts, Ann's and Bob's preferences are described by the following utility functions: UA (XA, YA) = TAYA and UB (XB, YB) = 2xB+ YB. In each of the following cases, determine the market equilibrium price ratio and allocation and depict the equilibrium in an Edgeworth box diagram. (a) Bob owns 20 bags of peanuts and Ann owns no peanuts. (b) Bob owns 15 bags of peanuts and Ann owns 5 bags. (c) Ann owns 20 bags of peanuts and Bob owns no peanuts.
True, false, or undetermined?
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