Morgan has the following utility function: u(x, y) = 5 ln(x) + 3y. Her income is given by I = 15 and the prices originally are pa = 2 and py = 3. (a) What are Morgan's Marshallian demands? (b) How much of each good is Morgan currently consuming? (c) What is the utility level that Morgan can achieve? (d) Assume the price of x increases to p' = 4, find Morgan's new levels of consumption. (e) Find the total, substitution and income effects for good x caused by the price change. Consider this price change a "large" price change (APx = P - Px = 4 - 2 = 2).

Morgan has the following utility function: u(x, y) = 5 ln(x) + 3y. Her income is given by I = 15 and the prices originally are pa = 2 and py = 3. (a) What are Morgan's Marshallian demands? (b) How much of each good is Morgan currently consuming? (c) What is the utility level that Morgan can achieve? (d) Assume the price of x increases to p' = 4, find Morgan's new levels of consumption. (e) Find the total, substitution and income effects for good x caused by the price change. Consider this price change a "large" price change (APx = P - Px = 4 - 2 = 2).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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