05- Income and Substitution EffectsQuestion 6 Suppose that a there are two goods, X and Y. The price of Good X is $5 and the price of Good Y is $8. The seller of Good Xoffers a deal where if a consumer buys 1 unit of Good X they pay full price, but the second unit of Good X is only $2.Calculate the slope of the budget constraint between 1 unit of Good X and 2 units of Good X.(Remember to include a negative sign. Round to the nearest two decimal places if necessary.)

The slope of the budget constraint between 1 unit of Good X and 2 units of Good X is −0.25…

Answered: Suppose that a there are two goods, X…

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter6: Consumer Choice Theory

Section: Chapter Questions

Problem 25SQ

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Suppose that a there are two goods, X and Y. The price of Good X is $5 and the price of Good Y is $10. The seller of Good X offers a deal where if a consumer buys 1 unit of Good X they pay full price, but the second unit of Good X is only $2. Calculate the slope of the budget constraint between 1 unit of Good X and 2 units of Good X.
Suppose there are two goods, x and y. If one good has a negative price, and the other good has a positive price, then the slope of the budget constraint will be positive. is this true or false?
Suppose that consumers' preferences are well behaved in that properties 4-1 to 4-4 (completeness, more is better, diminishing marginal rate of substitution, and transitivity) are satisfied. Furthermore, assume that X is a normal good, Y is an inferior good, and the price of good X increases. Then the substitution effect will lead consumers to consume Multiple Choice O more of good X and more of good Y. Oless of good X and more of good Y. O less of good X and less of good Y. more of good X and less of good Y.
1 Alice has a monthly lunch budget of 360 dollars which she spends on either burgers (B) or pizza (Z). The price of each pizza is 16. dollars and the price of each burger is 8 dollars. Alice's utility is given by: u(B, Z) = B'/2 +4Z!/2 + 47!/2 a) Find Alice's budget constraint. Set up the Lagrangian and find her optimal consumption. What is her new consumption if the price of burgers becomes 16 dollars?
1. Good X is a Giffen good (a good that violates the law of demand). Suppose that the price of Good X increases. Explain the interaction between the substitution effect and incoming effect of this price increase in a diagram with three budget lines and two indifference curves.
I. You only consume two goods and your preferences are represented by utility function U(x₁, x₂) = (x0.5 + x2.5)² for x₁ > 2 and x₂ > 0. 1. Find your marginal utility for each good. Simplify your answers. Based on your answers, are your preferences strictly monotonic? Why or why not? 2. Do your preferences obey the law of diminishing marginal utility for each good? Why or why not? If not, what is the behavior of your marginal utility for each good? Use calculus and words to answer this question.
Suppose the marginal utiliy of a Coke is 15 utils and the price is $1. The marginal utility of a pizza is 20 utils and its price is $2. If you buy 1 unit each will you achieve consumer equilibrium? If not how can greater total equilibrium be obtained?
1. A consumer plans to spend a total of $300 (M) on goods X and Y. X costs $5 and Y costs $6. a) Draw the consumer’s budget constraint on a graph, labeling the intercepts. What is the name of the slope, the formula for the slope, and the number of this particular slope? b) The consumer has a utility function of U = 3*X.4*Y.6. (Note that these exponents are 0.4 and 0.6.) Find the point on the budget constraint that maximizes their utility. This will be the point where the slope of the indifference curve equals the slope of the budget constraint. You will need to use marginal utilities to find the optimizing ratio of one good to another, and then use the BC to find the actual numbers for each good. 2. a) Draw a budget constraint for a consumer who spends $200 on X and Y. Each good costs $4. b) Now assume that the consumer purchases 20 units of X; how many units of Y will they purchase? Draw a typical (convex) indifference curve that is consistent with these preferences. c) Suppose…
I need help with my homework assignment that i dont undertsand. Suppose a consumer has a utility function given by U(X,Y) = MIN(X, 2Y). The consumer has $90 to spend (M = $90). The Price of good Y is PY = $1. Using a graph, sketch the consumer’s demand curve for Good X. Make sure to identify three points on the demand curve. Make sure your graph is neat, accurate, and scaled properly.
A consumer has $100 to spend on craft beer and Schweinefleischaft (pork shanks). Suppose craft beercosts $10 per 4-pack if the customer purchases up to five 4-packs. After that, it is $5 per 4-pack. SupposeSchweinefleischaft is $5 per order of pork shanks.(a) Draw the budget constraint for this consumer, with craft beer on the horizontal axis and Schweine-fleischaft on the vertical axis.(b) Will the consumer ever purchase exactly five 4-packs of craft beer? Explain why, using both thegraph in part (a) and words.
Suppose Mika has budget of $600 for only two goods, x and y. The price of a Good X is $10 and the price of good Y is $25. Mika's utility function for Good x and Good y is: U(x, y) = 2xy. Suppose the price of a Good X increases to $15. a. What is Mika's initial basket when the price of a Good X is $10? b. How much utility does this basket generate for Mika? c. What is Mika's final consumption basket when the price of Good X increases to $15?
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