Question
In: Economics
3. Anthony spends his income on xylophones (x) and yo-yos (y). Xylophones are priced at $2...
3. Anthony spends his income on xylophones (x) and yo-yos (y). Xylophones are priced at $2 (Px = 2), while a package of yo-yos cost $1 (Py = 1). Assume that Anthony has $40 to spend and his utility function can be represented as U(x, y) = x^0.75y^0.25. For this utility function, MUx = (0.75)y^0.25 /x^0.25 and MUy = (0.25)x^0.75 /y^0.75 . (a) What is the optimal number of xylophones and yo-yos for Anthony to purchase? (b) Suppose the price of a yo-yo increases to Py = 2. What is Anthony’s consumption bundle? (c) Are xylophones and yo-yos complements, substitutes, or neither. You must explain why to receive full credit.
Solutions
Rahul Sunny answered 2 years agoRelated Solutions
Kenny G spends all his income on two musical instruments: xylophones (x) and yotars (y). Kenny's...
Kenny G spends all his income on two musical instruments:
xylophones (x) and yotars (y). Kenny's utility function is
U(x,y)=x^0.2y^0.8 and his income is $50. Assume that xylophones
cost $10 and yotars cost $10 per unit.
Kenny has a general preference for ________. Since the
instruments have the same price, we assume his optimal bundle will
contain more_________ . Indeed, his optimal bundle includes________
xylophone(s) and _______ yotars. The utility he obtains from this
bundle is equal to ________, which...
A consumer spends his entire monthly income on x and y. The price of a unit...
A consumer spends his entire monthly income on x and y. The
price of a unit of x is $16 and the price of a unit of y is $12. If
he consumes the bundle (x, y) = (40, 30), his MRS x for y is 3/2,
meaning he would be indifferent to giving up 3 units of y to get 2
more units of x (or vice versa). Is this consumption plan optimal?
If not, does the plan consumer...
A consumer spends all of his income only on two goods, X and Y. His utility...
A consumer spends all of his income only on two goods, X and Y.
His utility function is given by U=XY. The price of good X is $P
and the price of good Y is $2. His income is $400.
(4) Derive the PCC (price consumption curve) of this consumer as
the price of good X changes .
(3) Derive this consumer’s demand function for good X.
(3) As the price of good X falls, this consumer’s demand becomes
less...
A consumer spends all of his income only on two goods, X and Y. His utility...
A consumer spends all of his income only on two goods,
X and Y. His utility function is given by
U=XY. The price of good X is $P and the
price of good Y is $2. His income is $400.
Derive the PCC (price consumption curve) of this
consumer as the price of good X changes .
Derive this consumer’s demand function for good
X.
As the price of good X falls, this consumer’s demand becomes
less elastic. True or...
Jones spends all his income on two goods: X and Y. The price of good X...
Jones spends all his income on two goods: X and Y. The price of
good X is PX = 15. The quantity of good X consumed is X = 20. The
price of good Y is PY = 25 and the quantity of good Y consumed is Y
= 30.
A) Based on Jones's consumption choices, what is his income?
B) If the prices next year will be PX = 9 and PY = 45, and
Jones's income will be...
Derek spends all his income on Coke and chips. Derek's utility function is U(x, y) =...
Derek spends all his income on Coke and
chips.
Derek's utility function is U(x, y) = min(4x, 2x + y),
where x is his consumption of Coke
(in cans) and y is his consumption of chips (in
packets). Derek is consuming 15 cans
Of Coke and 10 packets of chips. The price of Coke is
$10 per can.
a. Graph the indifference curve for Derek that passes
through the point (15,10). What is
the marginal rate of substitution at
(15,10)?...
Suppose John has an income of $300 and spends his income to purchase two goods (X...
Suppose John has an income of $300 and spends his income to
purchase two goods (X and Y ). Price of Y is $5 and price of X is
$10. Furthermore, John always consumes 2 units of Y with 1 unit of
X. (a) How many units of X and Y should John consume in order to
maximize his utility? (b) Suppose that the price of X goes up to
$15 (income and price of Y are the same). How...
Suppose John has an income of $300 and spends his income to purchase two goods (X...
Suppose John has an income of $300 and spends his income to
purchase two goods (X and Y ). Price of Y is $5 and price of X is
$10. Furthermore, John always consumes 2 units of Y with 1 unit of
X. (a) How many units of X and Y should John consume in order to
maximize his utility? (b) Suppose that the price of X goes up to
$15 (income and price of Y are the same). How...
If a consumer spends all her income on two goods X and Y , then she...
If a consumer spends all her income on two goods X and Y , then
she can just afford either consumption bundle (5, 10) or (10, 7.5).
Write the equation of her budget line.
Suppose a consumer spends all her income on goods X and Y. Suppose the price of...
Suppose a consumer spends all her income on goods X and Y.
Suppose the price of good X increases, and the consumer's income
decreases. Which of the following must be true?
The amounts of both good X and good Y that the consumer can
purchase decrease.
The amount of good Y that the consumer can purchase
decreases.
The amount of good X that the consumer can purchase
decreases.
The amount of good X that the consumer can purchase decreases,
and...
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