Microeconomics (9th Edition) (Pearson Series in Economics)
9th Edition
ISBN: 9780134184241
Author: Robert Pindyck, Daniel Rubinfeld
Publisher: PEARSON
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Chapter 4, Problem 6E
To determine
The leisure
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Aisha is considering how to allocate the next 6 hours of her free time. She could choose between leisure (L) and helping her neighbour with the house chores. If she decides to help her neighbour, she is going to get paid at £25 per hour, which she can then spend on her favourite pizza (P). Suppose the price of pizza is £12.50. Aisha’s preferences for leisure and pizza are given by the following utility function: .
U(L,P)= 3L + P
MU(L)= 3 MU(P)=1
Write down Aisha’s budget equation and draw the corresponding budget line. Clearly label the axes and calculate the coordinates of the points of intersection of the budget line with each axis.
Calculate Aisha’s marginal rate of substitution between leisure and pizza. Explain the concept of MRS and interpret the figure obtained.
Find Aisha’s optimal consumption bundle, both algebraically and graphically. Explain your reasoning.
Would Aisha’s optimal choice change if she could get a discount on her pizza purchases so that each pizza would cost…
John works in a shoe factory. He can work as many hours per day as he wishes at a wage rate w. Let C be the amount of dollars he spends on consumer goods and R. be the number of hours of leisure that he chooses. John's preferences are represented by U(C, R) = CR utility function Question 2 Part a John earns $8 an hour and has 18 hours per day to devote to labor or leisure, and he has $16 of nonlabor income per day. Draw John's indifference curves, budget constraints and solve for his optimal consumption and leisure choices.
Suppose we have the following utility
function: U(x,y)=x^O.33 y^0.67
1) What is the Marginal utility of x? Marginal
utility of y?
2) Comment on how the marginal utility of
each changes as x increases and discuss
why that makes sense.
3) Does this utility function follow the more
is better rule? How do you know?
4) What is the marginal rate of substitution
(MRS)? What do we know about the shape
of the indifference curve given this MRS?
5) Now suppose we have a new utility
function: U(x,y)=x+y. What type of goods
are these? Explain.
Chapter 4 Solutions
Microeconomics (9th Edition) (Pearson Series in Economics)
Ch. 4.A - Prob. 1ECh. 4.A - Prob. 2ECh. 4.A - Prob. 3ECh. 4.A - Prob. 4ECh. 4.A - Prob. 5ECh. 4 - Prob. 1RQCh. 4 - Prob. 2RQCh. 4 - Prob. 3RQCh. 4 - Prob. 4RQCh. 4 - Prob. 5RQ
Ch. 4 - Prob. 6RQCh. 4 - Prob. 7RQCh. 4 - Prob. 8RQCh. 4 - Prob. 9RQCh. 4 - Prob. 10RQCh. 4 - Prob. 11RQCh. 4 - Prob. 12RQCh. 4 - Prob. 1ECh. 4 - Prob. 2ECh. 4 - Prob. 3ECh. 4 - Prob. 4ECh. 4 - Prob. 5ECh. 4 - Prob. 6ECh. 4 - Prob. 7ECh. 4 - Judy has decided to allocate exactly 500 to...Ch. 4 - The ACME Corporation determines that at current...Ch. 4 - Prob. 10ECh. 4 - Prob. 11ECh. 4 - Prob. 12ECh. 4 - Prob. 13ECh. 4 - Prob. 14ECh. 4 - Prob. 15ECh. 4 - Prob. 16E
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