Question
In: Economics
4. A. A consumer has $360. Good X costs $4 each. Good Y costs $8 each....
4. A. A consumer has $360. Good X costs $4 each. Good Y costs $8 each. Draw the budget line. Label it “budget line A.” Preferences are perfect complements: utility = min{X,Y}. Both X and Y are normal goods. Numerically solve the consumer’s budget choice. Label it on the diagram, including the indifference curve, and all solved numbers. B. A consumer has $400. Good X costs $6 each. Good Y costs $7 each. Draw a new budget line, on a new graph. Label it “budget line
B.” Once again, preferences are perfect complements: utility = min{X,Y}. Both are normal goods. Numerically solve the consumer’s budget choice. Label it on the diagram, including the indifference curve, and all solved numbers.
C. Herman Cain ran for president in the year 2000. He made the following policy proposal: Reduce the federal income tax, and make up the federal revenue shortfall with a new national sales tax charged, in addition to the state and local sales tax. Total federal tax revenue would be unchanged. Herman Cain stated that the average person would be better off. Use the objective of the consumer (utility maximization, as illustrated in parts A and B) to explain and evaluate if Herman Cain was right or wrong.
Solutions
Rahul Sunny answered 1 year agoRelated Solutions
4. A. A consumer has $360. Good X costs $4 each. Good Y costs $8 each....
4. A. A consumer has $360. Good X costs $4 each. Good Y costs $8
each. Draw the budget line. Label it “budget line
A.” Preferences are perfect complements: utility = min{X,Y}.
Both X and Y are normal goods. Numerically solve the consumer’s
budget choice. Label it on the diagram, including the indifference
curve, and all solved numbers. B. A consumer has $400. Good X costs
$6 each. Good Y costs $7 each. Draw a new budget line, on a...
A. A consumer has $360. Good X costs $4 each. Good Y costs $8 each. Draw...
A. A consumer has $360. Good X costs $4 each.
Good Y costs $8 each. Draw the budget line. Label it “budget line
A.” Preferences are perfect complements: utility = min{X,Y}. Both X
and Y are normal goods. Numerically solve the consumer’s budget
choice. Label it on the diagram, including the indifference curve,
and all solved numbers.
B. A consumer has $400. Good X costs $6 each.
Good Y costs $7 each. Draw a new budget line, on a new...
A. A consumer has $360. Good X costs $4 each. Good Y costs $8 each. Draw...
A. A consumer has $360. Good X costs $4 each.
Good Y costs $8 each. Draw the budget line. Label it “budget line
A.” Preferences are perfect complements: utility = min{X,Y}. Both X
and Y are normal goods. Numerically solve the consumer’s budget
choice. Label it on the diagram, including the indifference curve,
and all solved numbers.
B. A consumer has
$400. Good X costs $6 each. Good Y costs $7 each. Draw a new budget
line, on a new...
Each unit of good X costs $2, and each unit of good Y costs $2. The...
Each unit of good X costs $2, and each unit of good Y costs $2.
The following table contains information on Felix’s utility from
goods X and Y.
Units of Good X
Total Utility of Good X
Units of Good Y
Total Utility of Good Y
(Utils)
(Utils)
1
28
1
22
2
54
2
40
3
78
3
52
4
100
4
60
5
120
5
64
Suppose Felix spends a total of $10 on good X and good...
A consumer has budgeted a total of K100 to spend on two goods, X and Y. She likes to consume a unit of good X in combination with a unit of good Y.
A consumer has budgeted a total of K100 to spend on two goods,
X and Y. She likes to consume a unit of good X in combination with
a unit of good Y. Any unit of good X that she cannot consume in
combination with a unit of good Y is useless. Similarly, any unit
of good Y that she cannot consume in combination with good X is
useless. If the price of a unit of good X is K5...
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,...
Suppose a consumer buys 20 units of good X and 10 units of good Y every...
Suppose a consumer buys 20 units of good X and 10 units of good
Y every year. The following table lists the prices of goods X and Y
in the years 2005–2007. Assume that these two goods at the
mentioned consumption constitute the typical market basket.
Calculate the price indices for these years with 2005 as the base
year and complete table. What is the inflation rates for 2006 and
2007? Compared to 2005, was inflation higher in 2006 or...
Consider a consumer with preferences over two goods (good x and good y) given by u...
Consider a consumer with preferences over two goods (good x and
good y) given by
u ( x , y ) = x ⋅ y.
Given income of I and price of good yas $ P yper pound and price
of good xgiven as $ P xper pound, the consumer chooses the optimal
consumption bundle given as
x ∗ = I 2 P x
and
y ∗ = I 2 P y .
Given P x = $ 1per pound...
Consumer A's marginal benefit for good X is MB=10-2X, and consumer B's marginal benefit is MB=8-X....
Consumer A's marginal benefit for good X is MB=10-2X, and
consumer B's marginal benefit is MB=8-X. The marginal cost for
producing X goods is MC=6+3X.
a Graph of the marginal benefits, market marginal benefits, and
marginal cost curves of goods X for public goods. Find balanced
production, the payment price of each consumer in a manner.
b Graph the marginal benefits, market marginal benefits, and
marginal cost curves of goods X for private goods. Find balanced
production, the payment price...
Suppose a consumer has a utility function given by u(x, y) = x + y, so...
Suppose a consumer has a utility function given by u(x, y) = x +
y, so that the two goods are perfect substitutes. Use the
Lagrangian method to fully characterize the solution to max(x,y)
u(x, y) s.t. x + py ≤ m, x ≥ 0, y ≥ 0, where m > 0 and p < 1.
Evaluate and interpret each of the multipliers in this case. What
happens to your solution when p > 1? What about when p =...
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