Question
In: Economics
Jack, our representative consumer, consumes varying amounts of beef and rice. Assume that B = quantity...
Jack, our representative consumer, consumes varying amounts of beef and rice. Assume that B = quantity of beef consumed, and that R = quantity of rice consumed. Jack’s utility function is given as: ?(?,?) = √(?.?)
a. Assume further that the price of beef is $4, the price of rice is $2, and that Jack’s income is $200. How much of each product should he purchase?
b. How are the quantities calculated in (a) above affected when the price of rice increases from $2 to $4? Calculate the substitution and income effects for rice?
c. Is rice a normal good or an inferior good? Explain.
Solutions
Rahul Sunny answered 1 year agoRelated Solutions
Question 1 [20 marks] A consumer consumes beef and other goods (beef is a normal good)....
Question 1 [20 marks]
A consumer consumes beef and other goods (beef is a normal
good). Using the indifference curve
analysis draw a graph that clearly show the forces (effects) that
determines a consumer final
consumption of beef when its price increases, while holding the
price of all other goods constant. (20)
Per usual, assume that the representative consumer, both in Europe and in the US, has a...
Per usual, assume that the representative consumer, both in
Europe and in the US, has a utility function given by
u(c,l) . As for their budget
constraints, assume that the real wage in both Europe and the US
equals w and that there does not exist physical capital.
Rather than assume the presence of lump-sum taxes, assume instead
that there exists an income tax so that the relevant real wage is
now the after-tax real wage, (1i )w where the...
A utility-maximizing consumer who consumes quantity x and y of two goods has a quadratic utility...
A utility-maximizing consumer who consumes quantity x and y of
two goods has a quadratic utility function given by
Ux,y=x+y-0.05x2-0.05y2
subject to
2x+5y=128
Where $128 is the consumer’s budget and the prices of the two
goods are, respectively, 2 and 5. Assuming marginal utilities Ux,
Uy > 0,
a. Find the quantity x and y that maximize the utility function.
b. Using bordered Hessian, check utility for a maximum.
c. What is the maximum utility of the consumer?
A utility-maximizing consumer who consumes quantity x and y of two goods has a quadratic utility...
A utility-maximizing consumer who consumes quantity x and y of
two goods has a quadratic utility function given by
Ux,y=x+y-0.05x2-0.05y2
subject to
2x+5y=128
Where $128 is the consumer’s budget and the prices of the two
goods are, respectively, 2 and 5. Assuming marginal utilities Ux,
Uy > 0,
a. Find the quantity x and y that maximize the utility function.
b. Using bordered Hessian, check utility for a maximum.
c. What is the maximum utility of the consumer?
A utility-maximizing consumer who consumes quantity x and y of two goods has a quadratic utility...
A utility-maximizing consumer who consumes quantity x and y of
two goods has a quadratic utility function given by
Ux,y=x+y-0.05x2-0.05y2
subject to
2x+5y=128
Where $128 is the consumer’s budget and the prices of the two
goods are, respectively, 2 and 5. Assuming marginal utilities Ux,
Uy > 0,
a. Find the quantity x and y that maximize the utility function.
b. Using bordered Hessian, check utility for a maximum.
c. What is the maximum utility of the consumer?
A utility-maximizing consumer who consumes quantity x and y of two goods has a quadratic utility...
A utility-maximizing consumer who consumes quantity x and y of
two goods has a quadratic utility function given by
Ux,y=x+y-0.05x2-0.05y2
subject to
2x+5y=128
Where $128 is the consumer’s budget and the prices of the two
goods are, respectively, 2 and 5. Assuming marginal utilities Ux,
Uy > 0,
a. Find the quantity x and y that maximize the utility function.
b. Using bordered Hessian, check utility for a maximum.
c. What is the maximum utility of the consumer?
Assume a consumer consumes only pumpkin pie and apple cider. Price of pie, Pp is $8...
Assume a consumer consumes only pumpkin pie and apple cider.
Price of pie, Pp is $8 and price of cider, Pc
is $5, and income of the consumer is $160.
Write down this consumers Budget constraint. Draw the BC and
mark the x and y coordinates. What is the slope of this BC?
If the income increases to $240, show graphically how the BC
changes. Mark the x and y coordinates. Write down the new BC. What
is the slope...
4) Consumer utility Quantity Total Utility from A Total Utility from B 1 40 37 2...
4) Consumer utility
Quantity
Total Utility from A
Total Utility from B
1
40
37
2
76
72
3
108
105
4
136
136
5
160
165
6
180
192
7
196
217
8
208
237
9
216
252
10
220
262
11
220
267
12
216
267
13
208
262
14
196
252
15
180
237
You are given the above total utilities for different
consumption amounts of goods A and B. The consumer has a budget of
60,...
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