Harry's indifference curve for popcorn (X1) and butter (X2) is U-min(X1, 3X2). Sketch two indifference curves. Make sure your axes and intercepts are labeled. True or False and explain: Perfect Substitute utility functions exhibit zero marginal rate of substitution True or False and explain: If a consumer's indifference curve is given by x2= 50/x1, this consumer is indifferent between the two bundles (100, 2) and (5, 10)

Harry's indifference curve for popcorn (X1) and butter (X2) is U-min(X1, 3X2). Sketch two indifference curves. Make sure your axes and intercepts are labeled. True or False and explain: Perfect Substitute utility functions exhibit zero marginal rate of substitution True or False and explain: If a consumer's indifference curve is given by x2= 50/x1, this consumer is indifferent between the two bundles (100, 2) and (5, 10)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Bundle A (q1=1, q2=8) and bundle B (q1=6, q2=2) are on the same indifference curve for an individual. The slope of the indifference curve at bundle A is MRS=−2 and the slope of the indifference curve at bundle B is MRS=−1/4. Suppose the individual has $10 to spend (y=10) on a bundle of the goods. Which set of prices would the individual prefer to face: (p1=1& p2=2) or (p1=2 & p2=1)? A. They are indifferent to the two different sets of prices B. They prefer a price of $1 for good #1 and a price of $2 for good #2 C. They prefer a price of $2 for good #1 and a price of $1 for good #2
Q5. Jason has preferences defined over novels (good x) and DVDs (good y) described by the utility function U(x,y)= x2y2. He has an income of $120; novels cost $5 each, while DVDs are priced at $15 each. [Hint: MUx=2xy2, MUy=2x2y] a) Sketch Jason's budget constraint, indifference curves and the interior solution in a graph. b) Calculate Jason's optimal consumption bundle, and his maximized utility level. Suppose the price of novels increases to $7.5, while the price of DVDs and income are unchanged. c) Calculate his new optimal bundle, show it in the same graph from a), and interpret the Marginal Rate of Substitution (MRS) at this new optional bundle (point).
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Q1. For each of the utility functions below, show whether the indifference curve for U = 8 is convex or not by showing whether the MRS is diminishing or not as x increases. a. U (x, y) = x + 2y b. U (x, y) = x³y² 1 c. U (x, y) = x² + 2y d. U (x, y) x² + y² =
Question 14 Consider imperfect substitute goods. On a graph, we know that the optimal bundle is chosen where the indifference curve just touches the budget constraint (i.e., the IC is tangent to the BC). What else is true at the optimal bundle? Select all that apply. The consumer chooses a bundle where MRSxy = MRTxy. The consumer chooses a bundle where MUX/Px = MUy/Py. The consumer chooses a bundle where the marginal utility per dollar spent on each good is equal. The consumer chooses a bundle where the marginal utility is at it's highest for each good. The consumer chooses a bundle where price per unit is minimized. The consumer chooses a bundle where MUX/MUy is maximized.
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Examine and show with a graph how a consumer attains equilibrium under the Indifference curve analysis.
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A5
Given that utility function for a consumer is given by u = (x-3)2 + (y-4)2, draw any twoindifference curves for this consumer while clearly labelling the higher one as ‘H’ and lower oneas ‘L’. Does he prefer more of a good to less of it? Does he prefer averages to extremebundles? Explain.
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