Budget Line: This is defined as the combination of all the goods that a consumer can buy by exhausting all of his income. The formula for the budget line is: Here, is the quantity of good X. is the quantity of good Y. is the total income. is the price of good X is the price of good Y. Marginal Utility : It is defined as the change in the total utility due to a change in the additional unit of a good. It may be diminishing, increasing, or constant. Maximizing utility principle : Maximizing utility in the case of two goods state that the equilibrium level of consumption of two goods for a consumer is achieved when the Marginal Utility per dollar of two goods are equal, provided the marginal utility of money is constant. This means that the following conditions must be fulfilled: Here, is the marginal utility of good X. is the marginal utility of good Y. is the price of good X. is the price of good Y.

Question

With your team I would like you to complete the following questions after please post your replies and we will discuss in class Choose a financial instrument or market (such as stocks, bonds, insurance, cash, gold, bitcoin). Explain how investments work for the individual investor mainly yourself. With the current market upheaval and uncertainty what would you and your team consider the best options for investment. Consider the idea of short term investing vs long term investing, laddering, safe haven, liquidity, and risk) Consider Roth IRA vs traditional IRA, ETF's, CD's, Mutual Funds. Always consider taxes and inflation your return should always be greater then inflation and taxes.

Answer 1

Question

Chapter 10, Problem 5P

To determine

Concept Introduction:

Budget Line: This is defined as the combination of all the goods that a consumer can buy by exhausting all of his income. The formula for the budget line is:

Here,

is the quantity of good X.

is the quantity of good Y.

is the total income.

is the price of good X

is the price of good Y.

Marginal Utility: It is defined as the change in the total utility due to a change in the additional unit of a good. It may be diminishing, increasing, or constant.

Maximizing utility principle: Maximizing utility in the case of two goods state that the equilibrium level of consumption of two goods for a consumer is achieved when the Marginal Utility per dollar of two goods are equal, provided the marginal utility of money is constant. This means that the following conditions must be fulfilled:

Here,
is the marginal utility of good X.

is the marginal utility of good Y.

is the price of good X.

is the price of good Y.

Expert Solution & Answer

Trending nowThis is a popular solution!

See solution

Check out sample textbook solution

Students have asked these similar questions

With your team I would like you to complete the following questions after please post your replies and we will discuss in class Choose a financial instrument or market (such as stocks, bonds, insurance, cash, gold, bitcoin). Explain how investments work for the individual investor mainly yourself. With the current market upheaval and uncertainty what would you and your team consider the best options for investment. Consider the idea of short term investing vs long term investing, laddering, safe haven, liquidity, and risk) Consider Roth IRA vs traditional IRA, ETF's, CD's, Mutual Funds. Always consider taxes and inflation your return should always be greater then inflation and taxes.

Short Description Fiscal Policy Graph Details Shown is a Fiscal Policy diagram with the variable Real GDP (billions of dollars) on the x-axis and the variable Price Level on the y-axis. The x-axis is scaled from 0 to 800 billion dollars with an increment of 40 billion dollars, and the y-axis is scaled from 30 to 150 units with an increment of 5 units. Object Details On the graph we have:Four Line Objects:An upward sloping Aggregate Supply, AS line with two endpoints:Point 1 at (160, 70)Point 2 at (720, 140)A downward sloping Aggregate Demand, AD1 line with two endpoints:Point 1 at (80, 110)Point 2 at (640, 40)A vertical Long-run Aggregate Supply, LRAS with two endpoints:Point 1 at (400, 145)Point 2 at (400, 30)A downward sloping Aggregate Demand, AD line with two endpoints:Point 1 at (720, 60)Point 2 at (160, 130)Two Reference Points:Lines AS, AD, and LRAS intersect at (400, 100)Lines AS and AD1 intersect at (280, 85) a. How much does aggregate demand need to change to restore the…

Fiscal Policy Graph Details Shown is a Fiscal Policy diagram with the variable Real GDP (billions of dollars) on the x-axis and the variable Price Level on the y-axis. The x-axis is scaled from 0 to 1000 billion dollars with an increment of 50 billion dollars, and the y-axis is scaled from 0 to 180 units with an increment of 10 units. Object Details On the graph we have:Four Line Objects:An upward sloping Aggregate Supply, AS line with two endpoints:Point 1 at (200, 40)Point 2 at (800, 160)A downward sloping Aggregate Demand, AD line with two endpoints:Point 1 at (200, 160)Point 2 at (800, 40)A downward sloping Aggregate Demand, AD1 line with two endpoints:Point 1 at (350, 170)Point 2 at (900, 60)A vertical Long-run Aggregate Supply, LRAS line with two endpoints:Point 1 at (500, 170)Point 2 at (500, 0)Two Reference Points:Lines AS and AD1 intersect at (600, 120)Lines AS, AD, and LRAS intersect at (500, 100) a. How much does aggregate demand need to change to restore the…