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Using a basic illustration, explain your understanding of utility theory given uncertainty
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- The following five individuals have different utility functions over food (good x) and clothing (good y): 1) u₁(x, y) = 3x²y 2) u₂(x, y) = 2√x + y 3) Uz(x, y) = x0.6y0.4 4) u₁(x, y) = x² + y² 1 5) us(x, y) = x + 3y For each of these people: a) Compute their marginal utilities of good x, MUx = Ju(x,y) MU, = ду du(x,y) ax b) Check whether the property of "more is better" is satisfied for both goods? Explain. [Hint: Check whether marginal utilities are positive assuming positive amounts of good x and good y] ƏMUX əx and marginal utility of good y, c) Does the marginal utility of good x diminish, remain constant, or increase as each of the individuals buys more x? Explain. [Hint: There are 2 ways to do it: 1) visually check what happens to the expression of MUx when x increases (does it decrease, keep constant or decrease?); or 2) take the partial derivative of this marginal utility with respect to x, that is ƏMUx .aMUX ƏMUX If 0, the marginal utility of x is increasing in x] d) Does the…U.S. food markets consumers viewed beef as a normal good from 1960-1976, but viewed it as an inferior good after that point. This type of change is not abnormal, in that as average household incomes rise, preferences might change. For instance, as households move from poor to middle-class, their consumption of beef might increase. However, as households move from middle- class to upper-middle-class, they might choose to purchase more exotic foods products. Assuming you are a beef producer in 1983, what will happen if incomes continue to increase? a. The marginal cost of beef will increase. b. The marginal cost of beef will decrease. c. The demand for beef will increase. d. The demand for beef will decrease.Anton, Betsy and Catherine are three college friends who regularly go the movies. At the movies, they can purchase skittles (x) and junior mints (y). The table below display the total utility each of them get from bundles of these two snacks (x, y). Bundle A = (1,1) B = (1,2) C = (1,3) D = (1,4) E = (1,5) Anton's Anton's Utility MUY (2) (1) 10 14 16 17 17.5 Betsy's Utility (3) 10 10 9 8 7 Betsy's MU, (4) Catherine's Utility (5) 10 12 15 19 24 Catherine's MUY (6) a) Yesterday the three friends went to watch the Barbie movie and they purchased the same bundle, bundle B = (1,2), with 1 bag of skittles and 2 bags of junior mints. Can you say who of the three friends experienced the highest utility from consuming bundle B? Explain. b) As you may have noticed, all bundles in the table contain 1 bag of skittles while they differ in the number of bags of junior mints. Fill in columns (2), (4) and (6) in the table by computing the marginal utility each friend receives from choosing a bundle…
- see attached. Whats the maximum whole dolla amount this individual would spend to insure against the loss of money?Examples of form utility?nments: 2022-SU-ECO2023 x apter 7 Problems 1 eBook https://ezto.mheducation.com/ext/map/index.html?_con=con&external_browser=0&launchUrl=https%253A%252F%252Flms.mheduca Question 1 - Chapter 7 Problem: X Mc Graw Hill Type here to search Suppose that at three units purchased, marginal utility is $8 and total utility is $30. If the marginal utility of the fourth unit purchased is $6, how much is the total utility of four units? Marginal ultility: $ im o Et Soved Prey 1 of 5 Nex
- 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…You like candy and cake. After using your entire $30 budget at the sugar store, you find that the marginal utility from the last candy you consumed was 60 and the last piece of cake was 30. Assuming you have maximized your utility and the price of a piece of candy is $4, calculate the price of cake? Do not enter dollar signs. Answer:If you had a vacation budget of $3000 to take vacation(s) this fall, use utility analysis theory to predict which vacation that you would participate in this fall. You need to explain why you would take this vacation instead of another one that you were considering. Assume that you must take the vacation or all life on Earth would perish. I made that last assumption to prevent you from saying that you would just spend it to pay down bills or put it in savings. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
- In the diagram to the right, we have five different combinations of movies and books. Combination A represents 2 movies and 3 books. Combination C represents more books (7) and the same number of movies (2). Points B, E, and F are other combinations with more movies, more books, or more of both. When compared to combination A, combination B provides satisfaction to the consumer. When compared to combination F, combination B provides satisfaction to the consumer. When compared to combination A, combination F provides satisfaction to the consumer. These conclusions are based on what assumption about preferences? Books 10- 9- 8- 7- 6- 4- 3- 2- 1- 0- 0 1 C A 2 3 E 4 5 Movies LL B 6 7 8 9 Nextsolve the question given in the image.
