Suppose an individual has the following utility function:U(x, y) = -4(x – 5.5)? – 2(y - 3.5)?Further assume that the price of good x, Prindividual has an income m = $65$6, the price of good y, Py = $8 and the%3D%3!a)enčes. Please label the graph properly including values for x and y.Draw an indifference curve (one IC is enough) that represents this person'sefer-b)and y* for the above utility function. Explain your answer.Intuitively, and without formally solving, can you guess the maximized values r*Derive the optimal values z* and y* by formally solving the above utility functionc)subject to the above constraint. You can use any of the utility maximization techniques welearned in class.d)is given in this problem as well as the budget constraint, can you explain the differencesbetween the answers you found in parts b) and c) (if any). Be as detailed as possible withyour explanation.Compare your answers in parts b) and c). Based on the utility function that

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Answered: Suppose an individual has the following…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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1. Briefly Explain why convex preferences mean that "averages are preferred to extremes."
will thumbs up solution, thank you :) Consider a consumer with an income of M = 200 in an economy with 2 goods. Let the prices be p1 = 7, and p2 = 12, respectively. Define the budget set facing the consumer. In a well labelled diagram, illustrate the budget set for the consumer. Find two bundles, (x1,x2) and (y1,y2) that the consumer can afford. Can the consumer afford the average of the two bundles in your example? Why or why not? Suppose the price of good 2 decreases to p2(prime) = 15. Can the consumer afford the two bundles you described before now? Why? Thank you
In your own words, explain what indifference curves are. Give 4 properties of indifference curves.
Help me
Que Robert's utility function is U(x, y) = 2/T + y. In every graph for this question, set y in the vertical axis and z in the horizontal axis. (a) Obtain the marginal rate of substitution MRS. Obtain the equation of the indifference curves for Ū = 2 and Ū = 4 (solving for y as a function of 1). Draw these indifference curves, identifying the intersections with each of the axes. (b) Suppose p, = 2 and Robert's income is M = 6. In a new graph, show the total, income and substitution effects (on the demand of r) of a drop in the price of z from p, = 4 to Pz = 2. (c) Now, the store where Robert goes for shopping has changed the prices to p, = 2 and py = 6, however, it also has a new special offer: for any amount of Y that Robert buys, he gets the same amount of X for free. Robert's income is M = 6. Draw Robert's budget line. Write down the equation of this line. Find Robert's utility-maximising bundle. (d)(d.1) Arthur's income is M = 6 and he goes to the same store as Robert. His utility…
8. Fabian consumes X and Y and the following utility function represents his utility: U = 2XY a. With a utility function of U = 2XY, Fabian's MU, = 2Y and his MU, = 2x ,where MU is marginal utility. Write an equation for Fabian's marginal rate of substitution (MRS). b. Suppose Fabian's income is $120 and Px = S6 and Py-$2, where Px is the price of X and Py is the price of Y. Write an equation for Fabian's budget constraint. c. Write the equation that equates the slope of Fabian's budget constraint to the slope of Fabian's indifference curve: d. If Fabian is spending all of his income, how much X and how much Y will he choose? Use the equations you wrote in part's b and c to answer this question. e. What will Fabian's utility be with this combination of X and Y? f. Now suppose the price of X increases to P.=10. Write the equation that equates the slope of Fabian's budget constraint to the slope of Fabian's indifference curve. How will this change the optimal combination of X and Y? What…
Suppose the utility function for a consumer is given by U = X + Y, where X and Y are a consumer's consumption of goods X and Y. Which of the following bundles does this consumer find indifferent between 10 units of X and 5 units of Y? You Answered a. 4 units of X, 10 units of Y b. 2 units of X, 13 units of Y c. 5 units of X, 7 units of Y d. 8 units of X, 8 units of Y
Suppose you have a $20 gift card and want to buy Blue and Red yarn. The utility function from yards of blue (B) and red (R) yarn can be expressed as follows: U(B,R) = 3B+R Red yarn costs $4 per yard. blue yarn costs $4 per yard. A) Graph the budget constraint and the indifference curves that can be reached. How many yards of each type of yarn will he purchase at these prices with his gift card?

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