Question
In: Economics
Leah loves buying shoes and going out to dance. Her utility function for pairs of shoes,...
Leah loves buying shoes and going out to dance. Her utility function for pairs of shoes, X, and the number of times she goes dancing per month, Y, is given by
U(x,y)=20XY2+100U(x,y)=20XY2+100
Now suppose that a pair of shoes sells for $10 and it costs Leah $5 to spend an evening out dancing. And assume that she has $90 to spend on clothing and dancing. You are now asked to derive consumer equilibrium.
a. What is the equation for her budget line? Draw it, and find the slope, y-intercept, and x-intercept.
b. Use math to solve for her optimal bundle. Show all works to find an optimal bundle.
c. Show how to determine this bundle in a diagram using indifference curves and a budget line.
d. At an optimal choice, what is the level of utility?
Solutions
Rahul Sunny answered 2 years agoRelated Solutions
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0.5
. Her income is
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Cleopatra spends all her money on bags (B) and shoes (S). Her utility function is U(B,...
Cleopatra spends all her money on bags (B) and shoes (S). Her
utility function is U(B, S) = 2B^0.5S^0.5 . Her income is $150.
Price of shoes is pS = 2. Price of bags depends on the number of
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all subsequent books. (a) Draw Kleopatra's budget constraint where
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Jessica spends all her money on bags(B) and shoes(S). Her utility function is U(B,S) = 2...
Jessica spends all her money on bags(B) and shoes(S). Her
utility function is U(B,S) = 2 * B^0.5 * S^0.5 . Her income is
150$. Price of shoes is Ps = 2. Price of bags depends on the number
of bags purchased. Bags cost $5 each if she purchases between 1 and
8 bags. If she purchases more than 8 bags, the price falls to $2
for all subsequent bags.
a) Draw Jessica's budget constraint where bag is on the...
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b) How many pair of shoes and raincoats does Andy buy?
c) If the federal government taxes coats...
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Esther consumes goods X and Y, and her utility function is U(X,Y)=XY+Y For this utility function,...
Esther consumes goods X and Y, and her utility
function is
U(X,Y)=XY+Y
For this utility function,
MUX=Y
MUY=X+1
a. What is Esther's MRSXY?
Y/(X + 1)
X/Y
(X + 1)/Y
X/(Y + 1)
b. Suppose her daily income is $20, the price of X is $4
per unit, and the price of Y is $1 per unit. What is her
best choice?
Instructions: Enter
your answers as whole numbers.
X =
Y =
What is Esther's utility when her...
QUESTION 20 Mandy gets utility from consuming nutella and doritos. Her utility function is of the...
QUESTION 20
Mandy gets utility from consuming nutella and doritos. Her
utility function is of the following form:
U = 50 Doritos + 87 Nutella
The price of nutella is $63 per jar, the price of doritos is $16
per bag and her income is $3,931
What is the MRS(doritos, nutella)?
QUESTION 21
The utility function and the prices are the following:
U =min{ 80 x1 , 12 x2}
P1=50, P2=52 and I =5,157
What is the optimal amount of...
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