Question
In: Economics
.Suppose that an individual has the following utility function: ?(?, ?) = ? 0.5? 0.5 in...
.Suppose that an individual has the following utility function:
?(?, ?) = ? 0.5? 0.5
in which L is leisure time in hours per day and C is the time for a one-way commuting to work in hours per day. It is also known that leisure time for this individual has opportunity cost of $5 per hour while commuting costs $4 per hour.
If you assume that this individual is a rational person who spends 7 hours for sleep and 7 hours at work daily, and her daily budget is $45, how she will allocate the rest of her day between leisure and commute?
Solutions
Rahul Sunny answered 1 year agoRelated Solutions
1. Suppose that an individual has the following utility function, ? = ?^0.5?.?, where U stands...
1. Suppose that an individual has the following utility
function, ? = ?^0.5?.?, where U stands for utility and W for
Wealth. The individual currently has a net wealth of $400,000. The
individual believes there is a 5% chance they will get into a car
accident this year. It is expected that a car accident would cost
them $100,000 (dropping their overall wealth to $300,000).
a) How much would it cost to purchase an actuarially fair
insurance policy to cover...
An individual has the following utility function: ?(??,?? ) = ???(??,???) and the following information: ??...
An individual has the following utility function: ?(??,?? ) =
???(??,???) and the following information: ?? = ?, ?? = ?, ?????? =
??? (Use good 1 in the x-axis and good 2 in the y-axis) a. (10
points) Write the budget constraint equation, draw the budget line
in a graph; b. (10 points) Find the optimal basket for the
individual on the same graph where you have the budget line.
Suppose that a consumer has a utility function U(x1,x2) = x1 ^0.5 x2^0.5 . Initial prices...
Suppose that a consumer has a utility function U(x1,x2) = x1
^0.5 x2^0.5 . Initial prices are p1 =1and p2 =1,andincomeism=100.
Now, the price of good1 increases to 2. (a) On the graph, please
show initial choice (in black), new choice (in blue), compensating
variation (in green) and equivalent variation (in red). (b) What is
amount of the compensating variation? How to interpret it? (c) What
is amount of the equivalent variation? How to interpret it?
Suppose that an individual has a utility function of the form U = Y½ where U...
Suppose that an individual has a utility function of the form U
= Y½ where U is utility and Y is income.
a) Calculate the utility level for Y values of $10,000,
$40,000, $90,000, $160,000, and $250,000 and then plot the
individual’s total utility function.
b) This individual is currently earning $90,000 but has
a 50-50 chance of earning either $40,000 or $160,000 in a new
job.
i) Calculate the expected income and utility from the
new...
Suppose an individual has the following utility function: U(X,Y) = 2XY. Draw the budget constraint when...
Suppose an individual has the following utility function: U(X,Y)
= 2XY. Draw the budget constraint when the price of each unit of X
and Y are 5 and 4, and income is 120. Find the choice that
maximizes utility.
Suppose an individual has the following utility function: U(x, y) = −4(x − 5.5)^2 − 2(y...
Suppose an individual has the following utility function: U(x,
y) = −4(x − 5.5)^2 − 2(y − 3.5)^2 Further assume that the price of
good x, px = $6, the price of good y, py = $8, and the individual
has an income m = $65
a) Draw an indifference curve (one IC is enough) that represents
this person’s preferences. Please label the graph properly
including values for x and y.
b) Intuitively, and without formally solving, can you guess...
Suppose an individual has the following utility function: U(x, y) = −4(x − 5.5)^2 − 2(y...
Suppose an individual has the following utility function: U(x,
y) = −4(x − 5.5)^2 − 2(y − 3.5)^2
Further assume that the price of good x, px = $6, the price of
good y, py = $8, and the individual has an income m = $65
a) Draw an indifference curve (one IC is enough) that represents
this person’s preferences. Please label the graph properly
including values for x and y.
b) Intuitively, and without formally solving, can you guess...
Suppose an individual has the following utility function: U(x, y) = −4(x − 5.5)^2 − 2(y...
Suppose an individual has the following utility function: U(x,
y) = −4(x − 5.5)^2 − 2(y − 3.5)^2
Further assume that the price of good x, px = $6, the price of
good y, py = $8, and the individual has an income m = $65
a) Draw an indifference curve (one IC is enough) that represents
this person’s preferences. Please label the graph properly
including values for x and y.
b) Intuitively, and without formally solving, can you guess...
A farmer has a utility function of u(w) = w^0.5. If there is good weather, the...
A farmer has a utility function of u(w) = w^0.5. If there is
good weather, the farmer will earn 100,000. If there is bad
weather, she will earn 50,000. The probability of bad weather in
any given year is 0.3. An insurance company offers the farmer a
contract where the farmer would receive a 50,000 payout when there
is bad weather. The insurance premium is denoted as p. What is the
maximum premium that the farmer would be willing to...
An individual's utility function is U= (X+1)0.5 (Y+2)0.5
An individual's utility function isU= (X+1)0.5 (Y+2)0.5(a) By implicit differentiation, find the slope of any indifference curve and show that it is given by the ratio of marginal utilities of the two goods.(b) Find the indifference curve for U= 6 and show that it is negatively sloped and convex. Does the indifference curve cut the axes? What does this imply about this individual's tastes?
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- We are evaluating a project that costs $1.68 million, has a six-year life, and has no...
- In C++ Having call-by-reference allows one to use storeback parameters, i.e., parameters whose values are transmitted...
- You must evaluate a proposal to buy a new milling machine. The base price is $175,000,...
- “Triangle Guessing” game in Python The program accepts the lengths of three (3) sides of a...
- THIS PROGRAM HAS TO BE WRITTEN IN C Single function to perform the parity computation on...
- Consider a buffer system consisting of Benzoic acid (pKa = 4.20) and sodium benzoate, a) Would...
- Decision Variables S T Minimize 1.8S + 2.20T Subject to: Potassium 5S + 8T >= 200...
ADVERTISEMENT