PROVIDE EXPLANATION 2. Elmer’s utility function is U(x, y)  minx, 5y. If the price of...

PROVIDE EXPLANATION

2. Elmer’s utility function is U(x, y)  minx, 5y. If the price of x is $25, the price of y is $10, and Elmer
chooses to consume 5 units of y, what must Elmer’s income be?
a. $1,350
b. $175
c. $775
d. $675
e. There is not enough information to tell.

Expert Solution

U(X,Y) = min(x, 5y)

price of x is $25, price of y is $10 and consume 5 units of y

Income = 25*x+10*y we know y =5

If U(x,y ) = min(ax,by) form than it's perfect compliment .

This function states that the value of the utility takes the minimum value of aX and bY. For example, if aX= 4 and bY is equal to 6, then U is equal to 4.The indifference curve for this type of utility function has an L-shaped. So it is difficult, if not impossible,to determine the MRS = MUx/MUy. Consequently, the common method in solving for the optimalbundle cannot be used here.However, this utility function provides the optimal ratio of good X and good Y for a given level of utility.This optimal ratio can be obtained by equating aX to bY. Or X/Y = b/a

Compare this with our utility function U(X,Y) = min(x, 5y) so a =1, b=5

X/Y =5/1

X/5 = 5/1 = 25 if y=5 is optimal consumption bundle

Income = 25x+5y = 25*25+5*10 = $675

Rahul Sunny answered 2 years ago

Ella’s preferences can be represented by the utility function u(x,y) = min{5x, y}. If the price...

Ella’s preferences can be represented by the utility function u(x,y) = min{5x, y}. If the price of x is $10 and the price of y is $15, how much money would she need to be able to purchase a bundle that she likes as well as the bundle (10, 25). Select one: a. $475. b. $85. c. $425. d. $209. e. $440.

1. In the utility function U(x,y)=x^5y^2 does Y exhibit diminishing marginal rate of substitution? Please show...

1. In the utility function U(x,y)=x^5y^2 does Y exhibit diminishing marginal rate of substitution? Please show your work. 2.What is the no-waste condition for the utility function U(x,y)=min{x/3,y/5} express your answer in terms of y as a function of x 3. What is the MRS of the utility function U(x,y)=3x+1/2y? please show your work

An individual has the utility function u = min (x, y). His income is $ 12....

An individual has the utility function u = min (x, y). His income is $ 12. Initially, the prices were px = 4 and py = 1, and the individual consumed the basket x = y = 2.4. Then, px increases to $ 6 (py does not change), and the individual now consumes the basket x = y = 1.71. a) Calculate the compensatory variation of this price change. b) Calculate the equivalent variation of this price change. c) On...

Jim’s utility function is U(x, y) = xy. Jerry’s utility function is U(x, y) = 1,000xy...

Jim’s utility function is U(x, y) = xy. Jerry’s utility function is U(x, y) = 1,000xy + 2,000. Tammy’s utility function is U(x, y) = xy(1 - xy). Oral’s utility function is -1/(10 + xy. Billy’s utility function is U(x, y) = x/y. Pat’s utility function is U(x, y) = -xy. a. No two of these people have the same preferences. b. They all have the same preferences except for Billy. c. Jim, Jerry, and Pat all have the same...

Given the utility function U ( X , Y ) = X 1 3 Y 2...

Given the utility function U ( X , Y ) = X 1 3 Y 2 3, find the absolute value of the MRS when X=10 and Y=24. Round your answer to 4 decimal places.

3. (25 marks) Consider an individual with utility of the form: U(x,y) = x0.75+5y. The price...

3. Consider an individual with utility of the form: U(x,y) = x0.75+5y. The price of good x is px and the price of good y is py. The individual faces a budget constraint of M. The marginal utility associated with good x is MUx=0.75x-0.25. The marginal utility associated with good y is MUy=5. Find the Marshallian demand functions for the individual. Characterize the income elasticity of demand, the price elasticity of demand, the cross-price elasticity of demand and explain what...

Consider a consumer with the utility function U(X, Y) = X^2 Y^2 . This consumer has...

Consider a consumer with the utility function U(X, Y) = X^2 Y^2 . This consumer has an income denoted by I which is devoted to goods X and Y. The prices of goods X and Y are denoted PX and PY. a. Find the consumer’s marginal utility of X (MUX) and marginal utility of Y (MUY). b. Find the consumer’s marginal rate of substitution (MRS). c. Derive the consumer's demand equations for both goods as functions of the variables PX,...

Brianna’s preferences can be represented by the utility function u(x,y) = min{x,y}. Initially she faces prices...

Brianna’s preferences can be represented by the utility function u(x,y) = min{x,y}. Initially she faces prices ($2,$1) and her income is $12. If prices change to ($3,$1) then the compensating variation Select one: a. There is not enough information to determine which variation is greater. b. is $2 more than the equivalent variation. c. is $1 less than the equivalent variation. d. equals the equivalent variation. e. is $1 more than the equivalent variation.

Amy has the utility function U=min(2x+y, x+2y) for goods x and y. 1) Draw the indifference...

Amy has the utility function U=min(2x+y, x+2y) for goods x and y. 1) Draw the indifference curves where U=6 and U=12. 2) Draw Amy's typical demand curve for good x.

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