Suppose Sam is willing to pay A total of 280,000 for an apartment. True or false: keep his maximum willingness to pay for an apartment in mind, Sam will buy the apparent because it would be worth more than marketplace of 350,000
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- Economics Summer break is approaching! Suppose you derive utility from days spent traveling on vacation domestically, D, and days spent traveling on vacation in a foreign country, F. Your utility function over these two “goods” is: U(D, F) : 4D0.25F 0.75 Let your budget constraint be I(D, F) = pDD + pF F; where I is your income, pD is the price of domestic travel per day, and pF is the price of foreign travel per day. a. Determine the demand functions for domestic travel and foreign travel. Make sure you show your work – show the steps used. b. Suppose that you’ve saved $800 for your summer travel, the price of domestic travel per day is $25 and the price of foreign travel per day is $100. How many days of each type of travel will you embark on? c. Illustrate the indifference curve, budget constraint, and the utility maximizing bundle associated with (b). Make sure you show the level of utility, the budget constraint intercepts, and the optimizing equilibrium. Your answerTRUE OR FALSE. *If Marvin likes "puto bumbong" more than "bibingka" while Rey likes "bibingka" more than "puto bumbong, the marginal utility from "puto bumbong" will become zero for Rey at fewer units while the marginal utility from "puto bumbong" of Marvin will become zero at higher units of consumption.25 Columns 1 through 4 in the following table show the marginal utility, measured in utils, that Ricardo would get by purchasing various amounts of products A, B, C, and D. Column 5 shows the marginal utility Ricardo gets from saving. Assume that the prices of A, B, C, and D are, respectively, $9, $3, $2, and $6 and that Ricardo has an income of $71. Column 1 Column 2 Column 3 Column 4 Column 5 Units of Good A Units of Units of Units of MU MU MU MU Good B Good C Good D Number of Dollars Saved MU 1 72 1 24 1 15 1 36 1 5 2 54 2 15 2 12 2 30 2 4 3 45 3 12 3 8 3 24 3 3 4 36 4 9 4 7 4 18 4 2 5 27 5 7 5 5 5 13 5 1 6 18 6 5 6 4 6 7 6 0.50 7 15 7 2 7 3.5 7 4 7 0.25 8 12 8 1 8 3 8 2 8 0.13 Instructions: Enter your answers as a whole number. a. What quantities of A, B, C, and D will Ricardo purchase in maximizing his utility? 4 units of A 3 units of B units of C units of D b. How many dollars will Ricardo choose to save?
- Every week since lockdown, Jack spends his entire budget to purchase 2 boxes of fried chicken and 3 cream puffs. Each box of fried chicken costs $8 and each cream puff costs $5. Suppose Jack's marginal utility from fried chicken is 12, and his marginal utility from cream puffs is also 12. What should Jack do if he wants to increase his utility? a) Increase fried chicken consumption and reduce cream puff consumption. b) Increase both cream puff and fried chicken consumption. c) Maintain current consumption. d) Increase cream puff consumption and reduce fried chicken consumption.Refer to the graph below Quantity of Y 160 0 Multiple Choice The consumer's income is $1,000 Why doesn't the consumer choose the combination at point B O Quantity of X 200 O The marginal utility of Y exceeds the marginal uplity of X O The consumer is willing to give up more X for an additional unit of Y than must be given up given the relative prices of X and Y. The marginal utility per dollar spent on X exceeds the marginal utility per dollar spent on Y The consumer is willing to give up more Y for an additional unt of X than must be given up given the relative prices of X and Y4. Two individuals, Amir and Budi, consume two goods, clothes (X) and shoes (Y). The utility functions for the two individuals are given as: Utility function of Amir, UA = 15X0.25Y0.75Utility function of Budi, UB = 25X0.5Y0.5 The current price for clothes (Px) is Rp 100,000 and the current price for shoes (PY) is Rp 150,000 a. Determine marginal rate of substitution (MRSXY)between clothes (X) and shoes (Y) for Amir and Budi! Please explain. b. Amir is currently consuming 5 units of clothes (X) and 10 units of shoes (Y), whereas Budi is consuming 12 units of clothes (X) and 8 units of shoes (Y). At this current consumption, have Amir and Budi reached the efficient allocation of clothes and shoes? If they have, explain why. If they have not, calculate the optimal allocation and explain. c. Considering the relative price between of clothes and shoes, at the current consumption, have Amir and Budi reached exchange equilibrium? Please explain d. Use the Edgeworth Box to illustrate the…
- 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…Consider the golfing question from above. Suppose that Ken values golfing for the afternoon at $65. That is, he puts a price on his happiness from golfing for the afternoon at $65. Should he go golfing? Why or why not? Yes, he should go golfing because his enjoyment ($65) is greater than the $30 price. No, he should not go golfing because the fees ($30) are greater than his lost income. Yes, he should go golfing because his enjoyment ($65) is greater than his lost income from not working ($60). No, he should not go golfing because his enjoyment ($65) is less than the cost ($90). Yes, he should go golfing. You should always go golfing when you get the chance!Allen has a utility function U=xy², where x is the consumption of apples and y is the consumption of bananas. Price of apple is 1 and price of bananas is 4. Allen has 30 dollars in his pocket, so how many apples and bananas will he purchase to maximize his utility? options: 10 apples and 5 bananas. 3 apples and 10 bananas. 30 apples only. none of above.
- Q 2Fang likes playing badminton with her friends. Her utility function for playing badminton every week is given by U(t) = 11t – 2t2, where t is measured in hours. They play on a badminton court, which they can rent per hour. Suppose the current price to play on the badminton court is £2.50 per hour. How many hours should Fang play if she wishes to maximise her utility? Explain what we mean by the principle of diminishing marginal utility. Does the principle apply in Fang’s case? Explain why. In a diagram with income in pound sterling on the horizontal axis and quantity on the vertical axis, show the relationship between Fang’s budget and the number of hours that would maximise her consumer surplus.John has $300 as income and he uses his income only for apples and bananas. If he uses his income only for apples, he can buy 10 pounds. If he uses his income only for bananas, he can buy 15 pounds. Which one is the correct formula for his budget constraint when X=pounds of apples, Y=pounds of bananas and the prices are per pound? a) More information is needed to answer the question. b) 15X + 10Y = 300 c) 10X + 15Y = 300 d) 20X + 30Y = 300 e) 30X + 20Y = 300