John really likes listening to music. His preferences for vintage records (?1) and music downloads (?2)...

John really likes listening to music. His preferences for vintage records (?1) and music downloads (?2) can be represented by the utility function ? = ?1?2. Initially, the price of a vintage record was $10, but it increased to $20 due to a new trend toward collecting vinyl. The price of a music download is $4 and John’s income is $240.

How would you describe John’s preferences for vintage records and music downloads?
The increase in the price of vintage records will affect John’s consumption of vintage records. Let’s use the Slutsky equation to decompose the change in quantity demanded. First, by how much will John change his consumption of vintage records due to the substitution effect (i.e. change in relative prices)?
By how much will John change his consumption of vintage records due to the income effect (i.e. change in purchasing power)? Are vintage records a normal or inferior good? Explain in one sentence.
What is the total change in John’s consumption of vintage records as the price increased from $10 to $20? Are vintage records an ordinary or Giffen good? Explain in one sentence.

Expert Solution

a) John has well-behaved or Cobb-Douglas preferences for vintage records and music downloads

b)

As on decreasing the income the quantity demanded falls, vintage record is a normal good.

Since price effect is positive, vintage records in an ordinary good.

Rahul Sunny answered 1 year ago

John likes both carrots (good 1) and lettuce (good 2) His preferences are shown below by...

John likes both carrots (good 1) and lettuce (good 2) His preferences are shown below by cobb douglas utility. u(x1,x2)=x11/2+x21/2 a) Find marshallian demand functions for x1*(p1,p2, m) and x2*(p1,p2,m) b) Find indirect utility function

John has decided to organize his CD music collection. He wants to catalog his music by...

John has decided to organize his CD music collection. He wants to catalog his music by Album, Artist, Songwriter, and Song. An album is a compilation of songs. Songs are created when artists sing a song written by songwriters. John has noted that some songs appear multiple times in his catalog because they are on regular albums and compilation albums. a) Write all of the assumptions regarding the music catalog. b) Based on your assumptions, construct an ERD diagram. Be...

Your younger brother likes to listen to music in his room in the morning. The loud...

Your younger brother likes to listen to music in his room in the morning. The loud music disturbs you in the neighbouring room during your online classes. A. Initially assume that he has the legal right to listen to music. Further, he gets a $50 benefit from the music he listens to, and you bear an $80 cost. If both of you bargain with each other, outline an efficient private solution. B. Now assume that you have the legal right...

Case #5: DJ John and his business of "Music on Wheels" John has started his second...

Case #5: DJ John and his business of "Music on Wheels" John has started his second year of the BAS at York University. John was not interested in working for others so he decided to start his own business with what is his passion: be a DJ in parties. A family friend that works as a lending officer in one of Canada's largest banks explained to him how the business plan has to be presented so he can get some...

Garcia has the following desires for music downloads: 0 if the price is higher than $2;...

Garcia has the following desires for music downloads: 0 if the price is higher than $2; 1, if the price is $2; 2, if the price is $1.50; 3, if the price is $1; 4, if the price is $0.50. Maria has a download desire of 0 if the price is higher than $2.50; 1, if the price is $2.50; 2, if the price is $2.00; 3, if the price is $1.50; 4, if the price is $1.00; 5,...

John likes to run and plans to run a marathon on Sunday. He knows that his...

John likes to run and plans to run a marathon on Sunday. He knows that his friend Nigel will call him and invite him to go for a beer on Saturday night. John enjoys beer but knows if he takes a beer on Saturday he will not be able to perform so well in the marathon on Sunday. Suppose John would enjoy a utility of 5 on Saturday if he takes a beer, and 1 if he stays at home....

Matthew is a new coder at Cengage General Hospital. His manager really likes his positive, can‐do...

Matthew is a new coder at Cengage General Hospital. His manager really likes his positive, can‐do attitude and willingness to learn. Currently, Matthew is coding Emergency Department (ED) visits. He likes coding EDs as they offer a lot of diversity and he finds them interesting. One day, while coding the EDs, he recognized the name of his sister, Julia, who just got married 6 months ago. He read through Julia’s visit with great interest. She was 3 months pregnant! He...

1. The table below shows Harmony’s preferences for the number of songs she downloads per month,...

1. The table below shows Harmony’s preferences for the number of songs she downloads per month, holding the prices of all goods constant. Income ($) Optimal number of songs Income elasticity of demand for songs 20 2 30 5 40 10 50 10 60 10 a. Complete the income elasticity of demand column for the table above (using the midpoint method). Are songs ever an inferior good for Harmony? At what level(s) of income are songs a luxury? (6 points)...

Q6. Ryan likes to listen to music while studying at home. His brother Isaac, however, needs...

Q6. Ryan likes to listen to music while studying at home. His brother Isaac, however, needs peace and quiet in which to work. They both get an allowance and so have some money. To deal with arguments over whether music is played or not the parents decide that on Monday, Wednesday, Friday and Sunday peace and quiet must reign, but that on Tuesday, Thursday and Saturday it’s ok to play music. Note that the parents set this rule just to...

Ryan likes to listen to music while studying at home. His brother Isaac, however, needs peace...

Ryan likes to listen to music while studying at home. His brother Isaac, however, needs peace and quiet in which to work. They both get an allowance and so have some money. To deal with arguments over whether music is played or not the parents decide that on Monday, Wednesday, Friday and Sunday peace and quiet must reign, but that on Tuesday, Thursday and Saturday it’s ok to play music. Note that the parents set this rule just to avoid...

Question