Question

1. Stan has 4 teenage daughters all in need cars. He is trying to decide how many Honda Civics (H) and/or a Toyota Camrys (T) to purchase for them. He has the following utility function over the cars:

U(H, T)=0.5H+T

The price of a Honda is $20,000 and the price of a Toyota is $24,000. If we graph the Honda Civic on the horizontal axis and Toyota Camry on the vertical axis what does the consumer’s income offer curve look like?

2. Diana has the following demand for pineapples:

Q p = 55 - 1 p

When the price of pineapples is p = 4 how many pineapples does Diana demand? Round your answer to 4 decimal places.

3.

Stephanie is planning an office party. She has the following utility function for fruit and cheese:

U ( F , C ) = min { 6 F , 2 C }

She has an income equal to $ 50 to spend on cheese and fruit. She prices the fruit and cheese during the first week of October. At this time the price of fruit per pound $ 1 and the price of cheese per pound equals $ 3 .

During the second week of October the price of fruit increased to $ 5 . 25 per pound. If Stephanie purchases the fruit and cheese at this time what is the magnitude of the substitution effect of this price change measured in pounds of fruit? Round your answer to the fourth decimal point.

4. Stephanie is planning an office party. She has the following utility function for fruit and cheese:

U ( F , C ) = min { 2 F , 2 C }

She has an income equal to $ 50 to spend on cheese and fruit. She prices the fruit and cheese during the first week of October. At this time the price of fruit per pound $ 1 and the price of cheese per pound equals $ 2 .

During the second week of October the price of fruit increased to $ 6 per pound. If Stephanie purchases the fruit and cheese at this time what is the magnitude of the income effect of this price change measured in pounds of fruit? Round your answer to the fourth decimal point.

Answer 1