21. In Problem 6, Elmer's utility function is U(x, y) = min{ x, y). If the price of x is $15, the price of y is$30, and Elmer chooses to consume 2 units of y, what must Elmer's income be?a. $240b. $90c. $220d. $120e. There is not enough information to tell.

Answered: In Problem 6, Elmer's utility function…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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1. In a simple but delicious world, Joey eats only sandwiches, s, and jam, j. He has a Cobb-Douglas utility function U(j, s) = Nj1-asª, where 0 0. The price of jam is pj, the price of sandwiches is Ps, and Joey has a monthly budget Y to spend on lunch. a. Explain why you can safely use a simpler Cobb-Douglas utility function, V(j, s), to represent Joey's preferences, which is the same as U(j, s) except for replacing N with 1. b. Transform V(j,s) by taking natural logs and bringing down exponents. Explain why it is useful to do this for a Cobb-Douglas utility function, but not for a quasi-linear utility function. Use In(V(j, s)) and the substitution method to derive the formulas for Joey's optimal amount of jam, j*, and sandwiches, s*, to buy and consume per month. Simplify your answers so that you arrive at the С. (1-a)Y aY formulas j* = and s* Ps d. What fraction of his income does Joey spend on jam, and what fraction on sandwiches?
2.
Assume the prices of product X and Y are $1.50 and $1.00, respectively, and that Mr. Chen has $24 to spend. Assume a normal indifference curve. Assume that Mr. Chen needs 4 of product X to maximize utility. 1. What is the slope of Mr. Chen’s budget constraint. 2. Write out Mr.Chen’s equation to his budget constraint. 3. What combination of X and Y will Mr. Chen purchase? 4. Now assume that the price of Y changed from $1.00 to $2.00, redo part a, b and c, 5. Draw the budget constraint graph and indifference curve before the change and after the change in the price of Y. Explain the substitution and income effect for this change. 6. Now assume instead of a price change, Mr. Chen’s budget changed from $24 to $30, and the prices are still $1.50 and $1.00 for product X and Y respectively. Redo parts a, b, c and draw the before and after change on the budget constraint and indifference curve. Questions 1-3 Have Been Answered Please 4-6.
Assume the prices of product X and Y are $1.50 and $1.00, respectively, and that Mr. Chen has $24 to spend. Assume a normal indifference curve. Assume that Mr. Chen needs 4 of product X to maximize utility. a. What is the slope of Mr. Chen's budget constraint. b. Write out Mr.Chen's equation to his budget constraint. c. What combination of X and Y will Mr. Chen purchase? d. Now assume that the price of Y changed from $1.00 to $2.00, redo part a, b and c,
You like candy and cake. After using your entire $30 budget at the sugar store, you find that the marginal utility from the last candy you consumed was 60 and the last piece of cake was 30. Assuming you have maximized your utility and the price of a piece of candy is $4, calculate the price of cake? Do not enter dollar signs. Answer:
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
Urgent
Assume the prices of product X and Y are $1.50 and $1.00, respectively, and that Mr. Chen has $24 to spend. Assume a normal indifference curve. Assume that Mr. Chen needs 4 of product X to maximize utility. a. What is the slope of Mr. Chen's budget constraint. b. Write out Mr.Chen's equation to his budget constraint. c. What combination of X and Y will Mr. Chen purchase? d. Now assume that the price of Y changed from $1.00 to $2.00, redo part a, b and c,
Assume that you have a budget of Taka 4000 that can spend on two goods like: coke and burger. Suppose coke costs Taka 100 per unit and burger costs 400 per unit. Suppose also that your utility function is given by the equation U(B, C) = 20BC. Write your budget equation. What combination of coke and burger should you buy to maximize utility?

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In Problem 6, Elmer's utility function is U(x, y) = min{x, y}. If the price of x is $15, the price of y is $30, and Elmer chooses to consume 2 units of y, what must Elmer's income be? a. $240 b. $90 c. $220 d. $120 e. There is not enough information to tell. %3D