Assume that 7 units of good x are a perfect substitute for 11 units of good...

Assume that 7 units of good x are a perfect substitute for 11 units of good y. Which utility function describes this situation?

A. ?^7?^11

B. ?^11?^7

C. 7x+11y

D. 11x+7y

E. ??? ( ?/7 , ?/11)

F. ??? ( ?/11 , ?/7 )

Expert Solution

Option D ( 11x + 7y)

Explanation

MRS_XY = Marginal Utility of X / Marginal Utility of good Y

The MRS_XY is equal to (11/7), so, the slope of the IC = - (11/7) and, so, the equation of the IC would be U₀ = 11x + 7y, and, therefore, the utility function would be

U (x, y) = 11x + 7y

Rahul Sunny answered 2 years ago

Suppose that Tom considers 12.3 units of good x to be a perfect complement for 17.86...

Suppose that Tom considers 12.3 units of good x to be a perfect complement for 17.86 units of good y. Write down a utility function that represents Tom’s preferences. What is the slope of the Tom’s income expansion path?

Suppose the indifference curves of a perfect substitutes agent have a slope of -9/7. Good x...

Suppose the indifference curves of a perfect substitutes agent have a slope of -9/7. Good x is the numéraire. What would ?? need to be in order to create the “degenerate case” (whereby the agent is indifferent between everything on his budget line)?

Assume diminishing marginal utility in good X and Y. Leigh is currently consuming 4 units of...

Assume diminishing marginal utility in good X and Y. Leigh is currently consuming 4 units of X and 4 units of Y. At these levels of consumption, the marginal utility of a unit of X is 10 utils and the marginal utility of a unit of Y is 10 utils. The price of good X is $1 and the price of good Y is $2. According to our consumer equilibrium condition, which of the following is true? Question 3 options:...

A change in the price of a substitute good will affect the demand for any good....

A change in the price of a substitute good will affect the demand for any good. a. true . b. false The demand curve is related to choice. a. true b.false The positive slope of the supply curve can be explained by comparative advantage and opportunity cost. a. true b.false Across nations, per capita real GDP and the Social Progress Index exhibit a generally negative relationship. a. true b. false According to the textbook, policies that sacrifice human welfare in...

Suppose a consumer buys 20 units of good X and 10 units of good Y every...

Suppose a consumer buys 20 units of good X and 10 units of good Y every year. The following table lists the prices of goods X and Y in the years 2005–2007. Assume that these two goods at the mentioned consumption constitute the typical market basket. Calculate the price indices for these years with 2005 as the base year and complete table. What is the inflation rates for 2006 and 2007? Compared to 2005, was inflation higher in 2006 or...

Data of a perfect competition market for good X is given by the following supply and...

Data of a perfect competition market for good X is given by the following supply and demand equation: (D) : P = -1/2*Q + 600 (S): P = 1/2*Q + 350 The world price; Pw = 450$ Assume that the country is small and there is free trade. a. Calculate the imported amount of good X, domestic quantity supplied and quantity demanded at the world price. b. Now the government imposes a tax of t = 10$/ imported unit, identify...

A money substitute is a claim. A claim is not an economic good but a means...

A money substitute is a claim. A claim is not an economic good but a means of obtaining disposal over economic goods. This determines its whole nature and economic significance. Essentially three (3) elements are involved in the valuation and pricing of a claim. They are: the value of the underlying asset, scarcity and utility. scarcity, utility and accounting for the time element. scarcity, utility and the greater or lesser probability of redemption. the value of the underlying asset, the...

Assume good x is Bitcoins (BTC) and good y is Dollars ($). The price of a...

Assume good x is Bitcoins (BTC) and good y is Dollars ($). The price of a Bitcoin is $10,488. Ralph has $25,800 in his bank account, and he also owns 2 Bitcoins. If Bitcoin is the numéraire, what is the equation of Ralph’s budget line?

Consumer A regards the two goods as perfect complements, always wanting 2 units of good 1...

Consumer A regards the two goods as perfect complements, always wanting 2 units of good 1 for every unit of good s, where as B regards 4 units of good s and 3 units of good 2 as perfect substitutes. Initially, A has 60 units of good 1 and 75 units of good 2, and B has 140 units of good 1 and 25 units of good 2. a) Draw an Edgeworth box (put good 1 on the horizontal axis)...

Question: If Coke and Pepsi are perfect substitutes for Lynn. She is always willing to substitute...

Question: If Coke and Pepsi are perfect substitutes for Lynn. She is always willing to substitute 1.1 Pepsis for 1 Coke. That is, her utility function is: U(Cokes, Pepsis)= 1.1*Cokes + Pepsis If she has an income of $100 and the price of Cokes is $1.20 and Pepsis is $1, then what is the optimal bundle that Lynn should consume?

Question