Suppose a person has utility function, prices, and income: U(a,B) = 2 ln(A) + ln(B), Pb=1...

Suppose a person has utility function, prices, and income: U(a,B) = 2 ln(A) + ln(B), Pb=1 and m=12. Draw her price offer curve and explain. Hint: it may be useful to think about the number of B's she purchases as Pa changes.

Expert Solution

Rahul Sunny answered 2 years ago

Suppose a person has utility function, prices, and income: u(aA,B)= 4A+B, PB=3 and m=24. Draw her...

Suppose a person has utility function, prices, and income: u(aA,B)= 4A+B, PB=3 and m=24. Draw her demand curve and explain

Suppose that an individual has wealth of $20,000 and utility function U(W) = ln(W), where ln(W)...

Suppose that an individual has wealth of $20,000 and utility function U(W) = ln(W), where ln(W) indicates the natural logarithm of wealth. What is the maximum amount this individual would pay for full insurance to cover a loss of $5,000 with probability 0.10?

A person with initial wealth w0 > 0 and utility function U(W) = ln(W) has two...

A person with initial wealth w0 > 0 and utility function U(W) = ln(W) has two investment alternatives: A risk-free asset, which pays no interest (e.g. money), and a risky asset yielding a net return equal to r1 < 0 with probability p and equal to r2 > 0 with probability 1 (>,<,=) p in the next period. Denote the fraction of initial wealth to be invested in the risky asset by x. Find the fraction x which maximizes the...

Suppose an agent has preferences represented by the utility function: U(x1, x2) =1/5 ln (x1) +...

Suppose an agent has preferences represented by the utility function: U(x1, x2) =1/5 ln (x1) + 4/5 ln (x2) The price of x1 is 6 and the price of x2 is 12, and income is 100. a) What is the consumer’s optimal consumption bundle? b) Suppose the price of x2 is now 4, what is the consumer’s new best feasible bundle?

a consumer has a utility function u = x^1/2y^1/2. prices are px = 2 and py...

a consumer has a utility function u = x^1/2y^1/2. prices are px = 2 and py = 3. she maximizes utility purchasing 6 units of good x. her income is equal to m = ________

Suppose an agent has preferences represented by the following utility function: u(x1, x2) = 1/4 ln(x1)...

Suppose an agent has preferences represented by the following utility function: u(x1, x2) = 1/4 ln(x1) + 3/4 ln(x2) The price of good x1 is 2, the price of good x2 is 6, and income is 40. a) What is the consumers best feasible bundle (ie, his optimal consumption bundle)? b) Interpret the consumer’s marginal rate of substitution at the best feasible bundle found in part a).

Utility function is U = 0.5 ln q1 + 0.5 ln q2 a) What is the...

Utility function is U = 0.5 ln q1 + 0.5 ln q2 a) What is the compensated demand function for q1? b) What is the uncompensated demand function for q1? c) What is the difference between uncompensated demand functions and compensated demand functions?

) 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...

Assume a consumer has the utility function U (x1 , x2 ) = ln x1 +...

Assume a consumer has the utility function U (x1 , x2 ) = ln x1 + ln x2 and faces prices p1 = 1 and p2 = 3 . [He,She] has income m = 200 and [his,her] spending on the two goods cannot exceed her income. Write down the non-linear programming problem. Use the Lagrange method to solve for the utility maximizing choices of x1 , x2 , and the marginal utility of income λ at the optimum.

Question 1 Jon Snow consumes pizza and burgers. His utility function is u(P, B) = PB...

Question 1 Jon Snow consumes pizza and burgers. His utility function is u(P, B) = PB where P is the number of pizzas and B is the number of burgers. Jon Snow has $30 to spend, and he plans to spend it all on pizza and burgers. The price of one pizza is $10 and the price of one burger is $3. (a) Find and label Jon Snow’s initial optimal bundle on a graph where pizza is on the x-axis...

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