Question
In: Economics
bob's perferences over goods (x) and (y) are shown by U(x,y) = 2xy. his income is...
bob's perferences over goods (x) and (y) are shown by U(x,y) = 2xy.
his income is 100.
A) Calculate the optimal basket when Px = $50 and Py = $20.
show your work
B) Calculate his income and substituion effects ( if
necessary, round two decimal places) if P falls to $40. show your
work
C) is good (x) normal or inferior? supprt/explain your
answer
D) Solve for the compensating variation. Explain what the
value represents. show your work.
Solutions
Rahul Sunny answered 1 year agoRelated Solutions
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by U(X,Y) = 56XY. The price of X is $14 a unit; the price of Y is
$8 a unit; and Leon has $672 to spend on X and Y.
a. Provide the equation for Leon’s budget line. (Your answer for
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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...
A consumer spends all of his income only on two goods, X and Y. His utility...
A consumer spends all of his income only on two goods, X and Y.
His utility function is given by U=XY. The price of good X is $P
and the price of good Y is $2. His income is $400.
(4) Derive the PCC (price consumption curve) of this consumer as
the price of good X changes .
(3) Derive this consumer’s demand function for good X.
(3) As the price of good X falls, this consumer’s demand becomes
less...
A consumer spends all of his income only on two goods, X and Y. His utility...
A consumer spends all of his income only on two goods,
X and Y. His utility function is given by
U=XY. The price of good X is $P and the
price of good Y is $2. His income is $400.
Derive the PCC (price consumption curve) of this
consumer as the price of good X changes .
Derive this consumer’s demand function for good
X.
As the price of good X falls, this consumer’s demand becomes
less elastic. True or...
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...
Your utility function over x and y is U ( x , y ) = l...
Your utility function over x and y is U ( x , y ) = l n ( x ) +
0.25 y. Your income is $20. You don’t know the prices of x or y so
leave them as variables (p x and p y).
a) (8 points) Find x*, your demand function for x. Find y*, your
demand function for y.
b) (10 points) Find the cross-price elasticity of demand for x
(E x ∗ , p y:...
Jones spends all his income on two goods: X and Y. The price of good X...
Jones spends all his income on two goods: X and Y. The price of
good X is PX = 15. The quantity of good X consumed is X = 20. The
price of good Y is PY = 25 and the quantity of good Y consumed is Y
= 30.
A) Based on Jones's consumption choices, what is his income?
B) If the prices next year will be PX = 9 and PY = 45, and
Jones's income will be...
A consumes two goods, x and y. A ’s utility function is given by u(x, y)...
A consumes two goods, x and y. A ’s utility function is given
by u(x, y) = x 1/2y 1/2
The price of x is p and the price of y is 1. A has an income
of M.
(a) Derive A ’s demand functions for x and y.
(b) Suppose M = 72 and p falls from 9 to 4. Calculate the
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(c) Calculate the compensating variation of the price
change....
A consumer purchases two goods, x and y and has utility function U(x; y) = ln(x)...
A consumer purchases two goods, x and y and has utility
function U(x; y) = ln(x) + 3y. For this utility function MUx =1/x
and MUy = 3. The price of x is px = 4 and the price of y is py = 2.
The consumer has M units of income to spend on the two goods and
wishes to maximize utility, given the budget.
Draw the budget line for this consumer when M=50 and the budget
line when...
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