Question
In: Economics
You are a consumer who consumes goods X (education) and goods Y (recreation), where the price...
You are a consumer who consumes goods X (education) and goods Y (recreation), where the price of good X is PX and the price of Y is Py. Your income that can be allocated to purchase these two items is M.
Questions
a. What happens if the price of education rises? Describe the
substitution effect and the income effect.
b. Derive the demand curve for education.
Solutions
Rahul Sunny answered 1 year agoRelated Solutions
You are a consumer who consumes goods X (education) and goods Y (recreation), where the price...
You are a consumer who consumes goods X (education) and goods Y
(recreation), where the price of good X is PX and the price of Y is
Py. Your income that can be allocated to purchase these two items
is M.
Questions
a. What happens if the price of education rises? Describe the
substitution effect and the income effect.
b. Derive the demand curve for education.
You are a consumer who consumes goods X (education) and goods Y (recreation), where the price...
You are a consumer who consumes goods X (education) and goods Y
(recreation), where the price of good X is PX and the price of Y is
Py. Your income that can be allocated to purchase these two items
is M.
Question
a. What happens if the price of education rises? Describe the
substitution effect and the income effect.
b. Derive the demand curve for education.
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?
A consumer consumes two products X and Y. The price of product X is $2 and...
A consumer consumes two products X and Y. The price of product X
is $2 and price of product Y is $4. Suppose xx-axis represents
quantity of product X, and y-axis represents quantity of product Y.
The optimal consumption bundle is (10, 5). If we plot the
consumer's indifference curves on this graph, can you say what the
slope of the indifference curve is at point (10,5)?
A) No. There is not sufficient information about preferences to
answer that.
B)...
On the planet Homogenia every consumer who has ever lived consumes only two goods, x and...
On the planet Homogenia every consumer who has ever lived
consumes only two goods, x and y, and has the utility function U(x,
y) = xy. The currency in Homogenia is the fragel. In this country
in 1900, the price of good 1 was 1 fragel and the price of good 2
was 2 fragels. Per capita income was 84 fragels. In 2000, the price
of good 1 was 3 fragels and the price of good 2 was 4 fragels....
On the planet Homogenia every consumer who has ever lived consumes only two goods, x and...
On the planet Homogenia every consumer who has ever lived
consumes only two goods, x and y, and has the utility function U(
x, y) = xy. The currency in Homogenia is the fragel. In this
country in 1900, the price of good 1 was 1 fragel and the price of
good 2 was 2 fragels. Per capita income was 108 fragels in 1990. In
2000, the price of good 1 was 3 fragels and the price of good 2...
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
income and substitution effects of the price change.
(c) Calculate the compensating variation of the price
change....
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