The consumer's utility function is the following: U=x+2x0.82The consumer's optimal values of x and x are the given by the following:2IP21.6P11.6P11-0.81-0.8x =>P1P1P2X =2P2The compensated demand equations for x and x are the following:21.6P0.81.6P1x = U-21-0.81-0.8lcPX =2cP22Assume the prices are the following: P =1, P=1, 7=20000, and the P that makes x =0 is P =6.25.What is the consumer surplus?21h

Consumer surplus is a concept in economics that represents the difference between the maximum price…

The consumer's utility function is the following: U=x+2x0.8 1 2 The consumer's optimal values of x and x, are the given by the following: 1 2 I P 2 1.6P 1 1.6P 1 1-0.8 1-0.8 x = x= 1 P 1 P 1 P, 2 P 2 2 The compensated demand equations for x and x are the following: 1 2 1.6P 0.8 1.6P 1 1 1 X =U-2 1-0.8 1-0.8 1c P x = 2c P 2 2 Assume the prices are the following: P =1, P =1, z=20000, and the P that makes x =0 is P What is the consumer surplus? 1 2 1 1 =6.25. 1h

The consumer's utility function is the following: U=x+2x0.8 1 2 The consumer's optimal values of x and x, are the given by the following: 1 2 I P 2 1.6P 1 1.6P 1 1-0.8 1-0.8 x = x= 1 P 1 P 1 P, 2 P 2 2 The compensated demand equations for x and x are the following: 1 2 1.6P 0.8 1.6P 1 1 1 X =U-2 1-0.8 1-0.8 1c P x = 2c P 2 2 Assume the prices are the following: P =1, P =1, z=20000, and the P that makes x =0 is P What is the consumer surplus? 1 2 1 1 =6.25. 1h

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose that i's preferences over goods x and y are represented by the following utility function U₁(x, y)=x45¹5. Let m denote the consumer's income, p denote the price of good x and let the price of good y equal 1. A) Find the Marshallian demand functions for goods x and y. B) Show how each of the demand function is affected by a change in the price of good x. C) Which of the goods is an inferior good?
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Consumer equilibrium exists when: P/MU of all goods is the same MU/P for all goods is the same TU/P for all goods is the same the MU for all goods is the same