Question

In: Economics

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 of food ranging between 1 and 6. b. Calculate the income and substitution effects of Andre’s consumption of food when the price of food rises from 1 to 4, and draw a graph illustrating these effects. Your graph need not be exactly to scale, but it should be consistent with the data. c. Calculate the cross-price elasticity of demand for hamburgers and steaks at those prices. Are steaks and hamburgers complements or substitutes? Please show your work

Solutions

Expert Solution

Stepwise solution is given in the images attached.


Related Solutions

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...
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
Samantha purchases food (F) and other goods (Y ) with the utility function U = FY....
Samantha purchases food (F) and other goods (Y ) with the utility function U = FY. Her income is 12. The price of a food is 2 and the price of other goods 1. a) How many units of food does she consume when she maximizes utility? b) The government has recently completed a study suggesting that, for a healthy diet, every consumer should consume at least F = 8 units of food. The government is considering giving a consumer...
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)
There are two goods – c and p. The utility function is U (P,C) = P...
There are two goods – c and p. The utility function is U (P,C) = P 0.75 C 0.25. $32 is allocated per week for the two goods, c and p. The price of p is $ 4.00 each, while the price of c is $ 2.00 each. Solve for the optimal consumption bundle. Suppose that the price for good p is now $ 2.00 each. Assuming nothing else changes, what is the new optimal consumption bundle. Draw the appropriate...
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.
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...
) A person’s utility function is U = 50F0.8B0.6 for goods F and B with prices...
) A person’s utility function is U = 50F0.8B0.6 for goods F and B with prices PF = $4 and PB = $1 and income Y = $140.  Marginal utilities of F and B are: MUF = 40F-0.2B0.6 and MUB = 30F0.8B-0.4 Graph the budget constraint (with F on the horizontal axis, B on vertical axis.)  Document the intercepts (numerically) and slope of constraint. Calculate the utility-maximizing choices of F and B.  Show on your graph. PF decreases to $2.  Find the new utility-maximizing...
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.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT