Paul's utility function is Cobb-Douglas. U = B0.2Z0.8, where his income is Y, the price of B is Pg, and the price of Z is Pz. What is Paul's Engel curve for B and Engel curve for Z? What does the shape of Engel curve say about Z? a) b) What is Paul's income consumption curve when PR = 1 and P, = 1? Calculate and graph it on Paul's consumption diagram. What does the shape of income consumption curve say about B and Z? c) What is Paul's demand for B when Y = 100, P, = 1? Calculate and graph it. How would this curve change if Paul's income increases?
Paul's utility function is Cobb-Douglas. U = B0.2Z0.8, where his income is Y, the price of B is Pg, and the price of Z is Pz. What is Paul's Engel curve for B and Engel curve for Z? What does the shape of Engel curve say about Z? a) b) What is Paul's income consumption curve when PR = 1 and P, = 1? Calculate and graph it on Paul's consumption diagram. What does the shape of income consumption curve say about B and Z? c) What is Paul's demand for B when Y = 100, P, = 1? Calculate and graph it. How would this curve change if Paul's income increases?
Chapter10: Consumer Choice Theory
Section: Chapter Questions
Problem 6P
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![Paul's utility function is Cobb-Douglas. U = B0.2Z0.8, where his income is Y, the price of B is Pg, and
the price of Z is Pz.
What is Paul's Engel curve for B and Engel curve for Z? What does the shape of Engel curve say
about Z?
a)
b)
What is Paul's income consumption curve when PR = 1 and P, = 1? Calculate and graph it on
Paul's consumption diagram. What does the shape of income consumption curve say about B
and Z?
c)
What is Paul's demand for B when Y = 100, P, = 1? Calculate and graph it. How would this
curve change if Paul's income increases?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F684b9d9c-0bd3-41b7-94b0-32e2c9d2d0b5%2Fddf02f7c-1fea-48ab-8b70-5b19a091157c%2Fkjap8sc_processed.png&w=3840&q=75)
Transcribed Image Text:Paul's utility function is Cobb-Douglas. U = B0.2Z0.8, where his income is Y, the price of B is Pg, and
the price of Z is Pz.
What is Paul's Engel curve for B and Engel curve for Z? What does the shape of Engel curve say
about Z?
a)
b)
What is Paul's income consumption curve when PR = 1 and P, = 1? Calculate and graph it on
Paul's consumption diagram. What does the shape of income consumption curve say about B
and Z?
c)
What is Paul's demand for B when Y = 100, P, = 1? Calculate and graph it. How would this
curve change if Paul's income increases?
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