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.

Expert Solution

Rahul Sunny answered 1 year ago

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...

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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?

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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...

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You are a consumer who consumes goods X (education) and goods Y (recreation), where the price...

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