State the implications of the weak axiom of revealed preference (WARP) for consumer choice. The following table indicates a consumer's observed choices for two goods, x1 and x2, under three sets of prices: period P1 P2 3 3 X2 1 1 2 2 3 1 2 3 3 4 1 1 Do these choices satisfy WARP? Explain why or why not.

State the implications of the weak axiom of revealed preference (WARP) for consumer choice. The following table indicates a consumer's observed choices for two goods, x1 and x2, under three sets of prices: period P1 P2 3 3 X2 1 1 2 2 3 1 2 3 3 4 1 1 Do these choices satisfy WARP? Explain why or why not.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter5: Income And Substitution Effects

Section: Chapter Questions

Problem 5.6P

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State the implications of the weak axiom of revealed preference (WARP) for consumer choice. The following table indicates a consumer's observed choices for two goods, a1 and *2, under three sets of prices: period Pi P2 1 1 3 3 2 1 3 3 4 3 1 Do these choices satisfy WARP? Explain why or why not.
Eren’s two main hobbies are taking vacations overseas (V) and eating expensivemeals (M). His utility function is given as: U(V,M) = V2MLast year, the average price of taking a vacation overseas was US$200 and the averageprice of an expensive meal is $50. However, due to supply problems in Onions, theaverage price of an expensive meal rose to $75. The average price of a vacation did notchange. His income, which is $1500, did not change. Suppose that the Department of Welfare wants to know how much should begiven to Eren to offset his change un utility due to the price increase of an expensivemeal. Calculate the compensative variation (CV).
Eren’s two main hobbies are taking vacations overseas (V) and eating expensivemeals (M). His utility function is given as: U(V,M) = V2MLast year, the average price of taking a vacation overseas was US$200 and the averageprice of an expensive meal is $50. However, due to supply problems in Onions, theaverage price of an expensive meal rose to $75. The average price of a vacation did notchange. His income, which is $1500, did not change. Calculate for the equivalent variation (EV) for the price change.
Eren’s two main hobbies are taking vacations overseas (V) and eating expensivemeals (M). His utility function is given as: U(V,M) = V2MLast year, the average price of taking a vacation overseas was US$200 and the averageprice of an expensive meal is $50. However, due to supply problems in Onions, theaverage price of an expensive meal rose to $75. The average price of a vacation did notchange. His income, which is $1500, did not change. Calculate the change in consumer surplus from consuming the expensivemeals considering the price change (Hint: you need to compare his optimalconsumption bundle before and after the price change to get the change in CS).
12) A consumer's preferences are given by U(X,Y)= Xo6y04. The price of X is 4, and the price of Y is 6. The consumer has an income of $2200. a) What is the utility maximizing choice of X and Y? b) How would the utility maximizing choice change if price of X rose to 8? c) Given the answers to the previous parts plot a linear demand function for X.
Please answer any one of the following discussion questions and reply to one of your peer's responses before the deadline. Question 1: Consumer Choice Mike loves playing PS5 games and Nintendo games. Notate the number of PS5 games as Np, the number of Nintendo games as Nn. His utility function is U(Np, Nn) = 2 x Np x Nn The prices of each PS5 game or Nintendo game are the same, which is $40. Suppose he has $400 to spend on them. (1) What is the equation for his budget line? (2) Solve mathematically for her optimal consumption bundle. (Hint: it is a constrained maximization problem) Then, show how to determine this bundle in a diagram using difference curves and a budget line. (insert an image with Nn on the vertical axis) (3) What will be the new optimal consumption bundle if we replace the utility function with U(Np, Nn) = Np x Nn Explain your answer.
Explain how an optimal decision of a consumer can be achieved by using utility-maximizing theory and revealed preference theory, please explain about how they are different and how they will get the same outcome!
11. Let u(x₁, x₂) = x₁02x₂0.8. Suppose the consumer initially has income level m = 20 and the prices are p₁ = 4 and p2 = 1. Calculate the income and substitution effect when the price of Good 1 decreases to p₁ = 2. Based on your calculation, was the substitution or income effect larger for Good 2?
1. For each of the following scaling functions for a von Neumann-Morgenstern utility func- tion, determine the Marginal Rate of Substitution between X1 and X2 and the equation for an indifference curve through the consumption bundle (100,100) (solve for X2 on the left hand side of the equation). State 1 is the bad outcome that occurs with probability 0.2 and State 2 the good outcome that occurs with probability 0.8. Graph these indif- ference curves and comment on what you see. Is a consumer with these preferences risk averse, risk neutral, or risk loving? (a) V(X) = InX (b) V(X)= VX (c) V(X)= X (d) V(X)= X²
Which of the following utility functions represent preferences which do not satisfy monotonicity? 1 U= - x+y 1 U= - 5ху Ou=xy O u= y
1. Is it impossible for two indifference curves to intersect one another? why? 2. What does it mean that preferences are complete? Now would the real-life implica- tions of this assumption look like?
The price of X is $20 and the price of Y is $40. Y 30 Uz 24 40 Units of good X based on the graph, at point B, Multiple Choiİce < Prev B. 14 Units of good Y