Picabo, an aggressive skier, spends her entire income on skis and bindings. She wears out one pair of skis for every pair of bindings she wears out. (LO3) a. Graph Picabo's indifference curves for skis and bindings.
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- Assume, as in Exercise 22.1, that a consumer has utility function F or fruit and chocolate. Determine the consumer's demand functions q1(P1, P2, M) and q2(P1, P2, M). Determine also It* in terms of P1, P2 and M. Find the indirect utility function and show that It* = 8Vj8M. Suppose, as before, that fruit costs $1 per unit and chocolate $2 per unit. If the income is raised from $36 to $36.5, determine the precise value of the resulting change in the indirect utility function. Show that this is approximately equal to (O.5)λ*, where λ* is evaluated at P1 = 1,P2 = 2 and M = 36. Exercise 22.1 A consumer purchases quantities of two commodities, fruit and chocolate, each month. The consumer's utility function is For a bundle (X1, X2) of X1 units of fruit and X2 units of chocolate. The consumer has a total of $49 to spend on fruit and chocolate each month. Fruit cost $1 per unit and chocolate costs $2 per unit. How many units of each should the consumer buy…Dev likes to consume scones (Good X) and cups of coffee (Good Y). Her utility functionis: U(x,y) = min{x, 2y}That is, her level of utility for any given bundle (x,y) is the lesser of x and 2y.Suppose the price of scones is $3 and the price of coffee is $2. Dev’s weekly budget is$20. Determine her optimal consumption bundle for a week.Lorenzo enjoys going to the theater to see plays, and he also enjoys going to rock concerts. The following diagram shows two of Lorenzo's indifference curves for going to plays and concerts. With Lorenzo's initial budget constraint (BC1), he chose to go to five concerts and three plays per month (point X). Then his budget constraint shifted to BC2, and he chose to go to four concerts and six plays per month (point Y). PLAYS 10 0 4 5 CONCERTS BC 8 Show Transcribed Text BC 10 C Of the following choices, which could have shifted Lorenzo's budget constraint from BC₁ to BC₂? Check all that apply. The price of theater tickets increased while his income and the price of concert tickets stayed the same. His income decreased while the prices of theater and concert tickets stayed the same. His income increased while the prices of theater and concert tickets stayed the same. The prices of both theater and concert tickets decreased while his income stayed the same. Based on Lorenzo's consumption…
- Alex, who was convinced that "Football is coming home", was very excited for the World Cup last year. Unfortunately, he realized that his favourite Paul Gascoigne jersey from Euro 1996 was getting old, so he wanted to buy a new one before England's first game the following week. He could either buy a 2014 James Milner shirt from retailer A, which would make him totally happy (utility=1), or a 2006 David Beckham shirt from retailer B, which gives him a utility of 0.8. However, the shirts are not available today. There is a 50% chance that retailer A will have the shirt on the week-end, and 70% chance that retailer B will have theirs on the week-end. Due to time and work constraints, Alex can only visit one of these retailers before the tournament starts, otherwise he will have to keep his old 1996 shirt, which gives him a utility of 0.5. He can also ask his friend Nathan to check both places in the morning. But being a Welsh supporter, Nathan will not do it for free and wants some money…If you had a vacation budget of $3000 to take vacation(s) this fall, use utility analysis theory to predict which vacation that you would participate in this fall. You need to explain why you would take this vacation instead of another one that you were considering. Assume that you must take the vacation or all life on Earth would perish. I made that last assumption to prevent you from saying that you would just spend it to pay down bills or put it in savings. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.Lucas likes lemon soda (X) and chips (Y). His utility function is given by: U (X, Y) = X0.2Y0.8 He earns $40 per week to spend on lemon soda (X) and chips (Y). The prices of lemon soda and chips are $2 and $4 respectively. Find out Lucas’s utility-maximizing bundle of lemon soda and chips (X*, Y*). Set up the utility-maximization problem and find out the price ratio of these two goods. Find out Lucas’s marginal utility of lemon soda (MUX) and marginal utility of chips (MUY). Calculate the MRSXY . Set up the optimal tangency condition and solve for Y in terms of X. Solve for Lucas’s optimal consumption bundle of lemon soda (X*) and chips (Y*). Draw the optimal consumption bundle on the budget constraint BC1 in Q1. Denote it as Bundle A. Make sure to indicate the optimal consumption of lemon soda (X*) and chips (Y*). Draw an indifference curve that is tangent to the budget constraint at Bundle A. Calculate the value of the MRSXY (the value not the formula) at the optimal…
- Suppose Mia's utility function on lemon soda (X) and chips (Y) is given by U(X,Y) = X0.5Y0.5 She has $80 per month to spend on lemon soda (X) and chips (Y). The prices of lemon soda (PX) and chips (PY) are $2 and $4 respectively.a. Solve for her optimal consumption bundle of lemon soda (X*) and chips (Y*)? i. Optimal Consumption in lemon soda (X*) : ii. Optimal Consumption in chips (Y*) : b. Suppose the price of lemon soda (X) increases to $8, what is the new optimal bundle? i. Optimal Consumption in lemon soda (X*) : ii. Optimal Consumption in chips (Y*) :Elizabeth makes $200 a week at het summer job and spends her entire weekly income on new running shoes and jeans, since these are only two items that provide utility to her. Furthermore,Elizabeth insists that for every pair of jeans she buys, she must also buy a pair of shoes. (without the shoes, the new jeans are worthless). Therefore, she buys the same number of pairs of shoes and jeans in any given week. a) If jeans cost $20 and shoes cost $20 , how many will Elizabeth buy of each?b) Suppose that the price of jeans rises to $30a pair , how many shoes and jeans will she buy?c) To what effect (income or substitution) do you attribute the change in utility levels between part a and part bTo determine the utility maximizing consumption of two products one uses the formula that is called the rule for maximizing utility: OP1/P2-MU1/MU2 which also is stated as MU1/PU1-MU2/P2.. OExplains the Diamond-Water Paradox. O Calculates the utility maximizing consumption of the two goods. All of the above are correct. None of the above are correct.
- Suppose that the only items you consume are bread and wine. If the price of bread were to increase tomorrow, and if simultaneously your income were to increase by just enough so that you were equally as happy tomorrow as today, what would happen to the level of your consumption of bread ? Illustrate your answer with indifference curvesRakhi likes to consume only two commodities X and Y, and nothing else. Both the commodities give her positive utilities, thereby giving rise to her preferences being well- behaved and convex. However, she treats commodity X as an inferior good. Suppose Rakhi earns an income of 1000 per month and the ongoing prices of commodities X and Y are 20 and 10, respectively. (a) Show, with the help of a diagram, what will happen to her optimal consumption of commodity X, in each of the following circumstances: Situation A: Price of X falls to 10, while everything else remains the same. Situation B: Her income increases to 2000, while prices remain the same. (b) What can you say about the demand curve for commodity X that Rakhi’s choice behaviour would produce? Elaborate, with the help of diagram.Matt's utility over consumption of goods 1, 2, 3, and 4 is given by u (21, 12, x3, x4) = min {a1, x2; x3} + x4 How much utility will Matt get from consuming the bundle (1, 2, 3, 4)?
