John consumes only two goods: wine (W) and beer (B). The following three bundles bring John the same utility: (2W, 0B), (1W, 1B) and (0W, 2B). John's preferences violate continuity. transitivity. strict convexity. more-is-better.
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John consumes only two goods: wine (W) and beer (B). The following three bundles bring John the same utility: (2W, 0B), (1W, 1B) and (0W, 2B). John's preferences violate
continuity.
transitivity.
strict convexity.
more-is-better.
Step by step
Solved in 3 steps
- Consumer spends $450 per week on two goods, X and Y. PX= $5 and PY=$3. His utility function is U= 0.5Xy2. What quantities of X and Y does he buy each week in equilibrium?Daisy is consuming X and Y so that she is spending her entire income and MUx/Px = 12 and MUy/Py = 10. To maximize utility, she shouldA) consume less of both X and Y.B) continue to consume the same amount of X and Y since she is already maximizing utility.C) consume more X and less Y.D) consume less X and more Y.Troy has preferences for laptops (L), and drones (D). Laptops costs $750 a unit and drones costs $2000 a unit. Troy has $15000 to spend on both goods. Troy is a utility maximizer. Describe the utility maximization condition. Using the available information at what value is utility expected to be maximized.
- Mr. Rational has $27 that he plans to spend purchasing 5 units of good X (priced at $3 per unit) and 6 units of good Y (priced at $2 per unit). The marginal utility of the fifth unit of X is 30, and the marginal utility of the sixth unit of Y is 18. If Mr. Rational is a utility maximizer, he should: buy less of X and more of Y. buy X and Y in the quantities indicated. buy more of X and less of Y. not buy anything. buy less of X and even lesser than that of Y.Brian spends his entire monthly income of $1200 on shoes (S) and pizzas (P). The price of a pair of shoes is $60, and the price of a pizza is $20. If he consumes 10 pairs of shoes and 30 pizzas, his MRS is 2P/1S. (A quantity of shoes is measured along the x-axis, and a quantity of pizza is measured along the y-axis.) His choice is optimal. True FalseA consumer currently spends a given budget on two goods, X and Y, in such quantities that the marginal utility of X is 15 and the marginal utility of Y is 8. The unit price of X is $3 and the unit price of Y is $2. The utility-maximizing rule suggests that this consumer should Multiple Choice a. decrease consumption of product X and increase consumption of product Y. b. increase consumption of product X and increase consumption of product Y. c. decrease consumption of product Y and increase consumption of product X. d. stick with the current consumption mix because it yields maximum utility.
- Donald likes fishing (X1) and hanging out in his hammock (X2). His utility function for these two activities is u(x1, x2) = 3X12X24. (A) Calculate MU1, the marginal utility of fishing. (B) Calculate MU2, the marginal utility of hanging out in his hammock. (C) Calculate MRS, the rate at which he is willing to substitute hanging out in his hammock for fishing. (D)Last week, Donald fished 2 hours a day, and hung out in his hammock 4 hours a day. Using your formula for MRS from (c) find his MRS last week. (E) This week, Donald is fishing eight hours a day, and hanging out in his ham mock two hours a day. Calculate his MRS this week. Has his MRS increased or decreased? Explain why? (F) Is Donald happier or sadder this week compared to last week? Explain.Suppose the marginal utility of a Coke is 15 utils, and its price is $1.50. The marginal utility of a pizza is 20 utils, and its price is $5. To achieve consumer equilibrium, you need to spendRoy has preferences for laptops (L), and drones (D). Laptops costs $750 a unit and drones costs $2000 a unit. Roy has $15000 to spend on both goods. Give the equation for Roy’s budget line. If drones are on the vertical axis, what is the slope of the budget line? Roy is a utility maximizer. Describe the utility maximization condition. Using the available information at what value is utility expected to be maximized. “Drones are Roy’s favorite electronic therefore the law of diminishing marginal does not apply”. Do you agree with this statement? It is known that the indifference curve is convex. What does this tell you about the relationship between the goods?
- Mario consumes two goods: cars and motorbikes. An increase in the price of cars while holding income and the price of motorbikes constant will: (A) increase the marginal utility provided by cars. B) decrease the marginal utility per dollar spent on cars. (C) reduce the individual's preference for cars. D increase the marginal utility per dollar spent on motorbikesPrice of Can of Beer = $0.50 Total Utility Price of Slice of Pizza = $1.00 Total Utility Slices per Week Cans per Week 1 32 15 63 29 3 42 91 4 54 115.75 65 136 6. 75.75 154 86 171 8. 96 8 187 9. 105 201 10 113 10 213 If this consumer only has $10.00 to spend on beer and pizza a week, and is currently consuming 7 slices of pizza and 6 cans of beer per week, what should this consumer do to maximize his utility? Buy only beer. Buy only pizza. Buy more beer and less pizza. Buy more pizza and less beer. 234 567009EXERCISE 4 Milo spends £27 on stamps (S) and maple candy (C). His preferences for these goods are given by the following utility function: U(S, C) = min {S, 3C). Suppose that price per unit of S is £1.1 and the price per unit of C is £2.1. a) Write down Milo's budget equation and draw the corresponding budget line. Clearly label the axes and calculate the coordinates of the points of intersection of the budget line with each axis. In your graph, indicate the consumption bundle of 12 stamps and 6 maple candies. Can Milo afford this bundle? Explain. b) Find Milo's optimal consumption bundle, both algebraically and graphically. Explain your reasoning. c) If the price of a stamp increases to £1.4, how should Milo's income change for him to be as well off as before this change in prices? d) Discuss the implications of the price change from c) on Milo's optimal choice. In your discussion, include the analysis of the substitution and income effects as well as Milo's demand for stamps and/or…
