Question
In: Economics
Short Answers Suppose you derive utility from Food (F) and Clothing (C). Your preference exhibits diminishing...
Short Answers
- Suppose you derive utility from Food (F) and Clothing (C). Your preference exhibits diminishing MRS between F and C. Let’s put F on the Horizontal axis and C on the vertical axis.
a. If price of Food increases, show the IE and SE on a separate diagram if F is a normal good.
b. If price of Food increases, show the IE and SE on a separate diagram if F is an inferior good.
c. If price of Food increases, show the IE and SE on a separate diagram if F is a Giffen good.
d. If price of Food decreases, show the IE and SE on a separate diagram if F is a normal good.
e. If price of Food decreases, show the IE and SE on a separate diagram if F is an inferior good.
f. If price of Food decreases, show the IE and SE on a separate diagram if F is a Giffen good.
Please answer E and F
Solutions
Expert Solution
In the diagram given below, AB is original line and AB1 is new budget line after price change. Food is on horizontal axis and clothing on vertical axis. mn line is parallel to new budget line which shows substitution effect.
In case of normal good, when price decrease quantity demanded in the market increases. Inferior goods also follow law of demand because quantity demanded have increased due to fall in the prices. But in case of Giffen goods ' law of demand is not followed. Here quantity demanded decreased due to decrease in price.
Answer A-D has been given below.
Rahul Sunny answered 2 years agoRelated Solutions
Suppose you derive utility from Food (F) and Clothing (C). Your preference exhibits diminishing MRS between...
Suppose you derive utility from Food (F) and Clothing (C). Your
preference exhibits diminishing MRS between F and
C. Let’s put F on the Horizontal axis and C on the
vertical axis.
e. If price of Food decreases, show the IE and SE on a separate
diagram if F is an inferior good.
f. If price of Food decreases, show the IE and SE on a separate
diagram if F is a Giffen good.
Andre buys two goods, food f and clothing c , with the utility function U (...
Andre buys two goods, food f and clothing c , with the utility
function U ( f, c ) = f · c + f . His marginal utility of food is M
U f = c + 1 and his marginal utility of clothing is M U c = f . He
has an income of 20. The price of clothing is 4. a. Derive the
equation representing Andre’s demand for food, and draw this demand
curve for prices...
A consumer purchases two goods, food (F) and clothing (C). Her utility function is given by...
A consumer purchases two goods, food (F) and clothing (C). Her
utility function is given by U(F,C)=FC+F. The marginal utilities
are MUF=C+1 and MUC=F. The price of food is
PF, the price of clothing is PC, and the
consumer’s income is W.
Suppose W=10, Pf=4 and Pc decreases from 6 to 1.5. What is the
income effect of clothing?
A consumer purchases two goods, food (F) and clothing (C). Her utility function is given by...
A consumer purchases two goods, food (F) and clothing (C). Her
utility function is given by U(F,C)=FC+F. The marginal utilities
are MUF=C+1 and MUC=F. The price of food is PF, the price of
clothing is PC, and the consumer’s income is W. Suppose W=10, Pf=4
and Pc decreases from 6 to 1.5. What is the income effect of
clothing?
Group of answer choices
7/6
3/5
6/7
1
Carina buys two goods, food F and clothing C, with the utility function U = FC...
Carina buys two goods, food F and clothing C,
with the utility function U = FC + F.
Her marginal utility of food is MUF= C
+ 1 and her marginal utility of clothing is
MUC= F. She has an income of 20. The
price of clothing is 4.
a) Her demand for food is represented by F =
20/PF , where PF is
price for Food. True/False.
b) Calculate the income effects on Carina’s consumption of food
when the...
Suppose that Bridget and Erin spend their incomes on two goods, food (F) and clothing (c)....
Suppose that Bridget and Erin spend their incomes on two goods,
food (F) and clothing (c). Bridget’s preferences are represented by
the utility function U(F, C) = 10F C, while Erin’s preferences are
represented by the utility function U(F, C) = 0.20F 2C 2 .
1. With food on the horizontal axis and clothing on the vertical
axis, identify on a graph the set of points that give Bridget the
same level of utility as the bundle (10,5). Do the...
There are two goods: food F and clothing C. MRS is the marginal rate of substitution,...
There are two goods: food F and clothing C. MRS is the marginal
rate of substitution, and RPT is the rate of product
transformation.
a) in Fredonia in autarky, MRS=6F/C and in Sylvania in autarky
MRS*=2F/C. Specify a trade which makes both countries better
off.
b) in Gargantua in autarky RPT=4F/C and in Lilliput in autarky
RPT*=10F/C. Specify a reallocation of production across countries
such that the output of both goods rise.
Jane's utility function is represented as U=F^0.5C^0.5, F is the quantity of food and C is...
Jane's utility function is represented as U=F^0.5C^0.5, F is the
quantity of food and C is the quantity of clothing. If her budget
constraint is represented as 120= 2F +C, her optimal bundle of
consumption should be .... (Please show clearly each mathematical
step. Thank you so much!! I really appreciate it.)
A.(50F, 50C).
B.(45F, 20C).
C.(40F, 40C).
D.(20F, 60C)
Assume Home produces 2 goods, clothing (C) and food (F). Clothing is produced using labor (L)...
Assume Home produces 2 goods, clothing (C) and food (F).
Clothing is produced using labor (L) and capital (K), while food is
produced using labor (L) and land (T). The total supply of labor,
capital, and land are 1,200, 1,000, and 1,600, respectively. Labor
is mobile across sectors. All markets are competitive. Home’s
production functions for clothing and food are given by:
QC = LC
K1/3 2/3
QF = LF
T1/2 1/2
Now suppose there is another country, Foreign, which...
Suppose Anne’s utility function for food (X) and clothing (Y) is given by U (X,Y) =...
Suppose Anne’s utility function for food (X) and clothing (Y) is
given by U (X,Y) = 4X1/2 + Y and Anne had budget constraint I = PxX
+ PyY.
a. Find Anne’s optimal bundle if Px = 4 and Py = 4 and Anne has
I = 60.
b. Discuss how the demand for X depends on her income.
c. Suppose now that the price of X increases to 8. Find the SE
and IE of the price change.
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