"Suppose a consumer has preferences represented by the utility function U(X,Y) = X(^2)Y Suppose Py =...

"Suppose a consumer has preferences represented by the utility function U(X,Y) = X(^2)Y Suppose Py = 1, and the consumer has $360 to spend. Draw the Price-Consumption Curve for this consumer for income values Px =1, Px = 2, and Px = 5. Your graph should accurately draw the budget constraints for each income level and specifically label the bundles that the consumer chooses for each income level. Also for each bundle that the consumer chooses, draw the indifference curve that goes through that bundle. Label your graph!"

Expert Solution

Rahul Sunny answered 2 years ago

Suppose a consumer has preferences represented by the utility function U(X,Y) = X2Y Suppose PY =...

Suppose a consumer has preferences represented by the utility function U(X,Y) = X2Y Suppose PY = 1, and the consumer has $300 to spend. Draw the Price-Consumption Curve for this consumer for income values PX = 1, PX = 2, and PX = 5. Your graph should accurately draw the budget constraints for each income level and specifically label the bundles that the consumer chooses for each income level. Also, for each bundle that the consumer chooses, draw the indifference...

Consider a consumer with preferences represented by the utility function: u(x, y) = x1/4y1/2 Suppose the...

Consider a consumer with preferences represented by the utility function: u(x, y) = x1/4y1/2 Suppose the consumer has income M = 10 and the prices are px=1 and Py = 2. (a) Are goods x and y both desirable? (b) Are there implications for the utility maximization problem for the consumer from your finding in 1a? If so, explain in detail. (c) Derive the utility maximizing bundle.

Consider a consumer with preferences represented by the utility function: u(x; y) = x1/4y1/2 Suppose the...

Consider a consumer with preferences represented by the utility function: u(x; y) = x1/4y1/2 Suppose the consumer has income M = 10 and the prices are px = 1 and py = 2. (a) Are goods x and y both desirable? (b) Are there implications for the utility maximization problem for the consumer from your finding in a? If so, explain in detail.

Suppose a consumer has preferences represented by the utility function U(X,Y) = MIN[X,2Y]. Suppose PX =...

Suppose a consumer has preferences represented by the utility function U(X,Y) = MIN[X,2Y]. Suppose PX = 1 and PY = 2. Draw the Income Consumption Curve for this consumer for income values M = 100, M = 200, and M = 300. Your graph should accurately draw the budget constraints for each income level and specifically label the bundles that the consumer chooses for each income level. Also, for each bundle that the consumer chooses, draw the indifference curve that...

A consumer has his preferences represented by the utility function U(x,y) = min {5x + 4y,...

A consumer has his preferences represented by the utility function U(x,y) = min {5x + 4y, 4x + 7y} if x is on the horizontal axis and y is on the vertical axis, what is the slope of his indifference curve at the point (10,10) a. -4/7 b. -5/4 c. -4/5 d. -7/4 e. -5/7

A consumer's preferences for food (x) and clothes (y) are represented by the utility function u(x,y)=...

A consumer's preferences for food (x) and clothes (y) are represented by the utility function u(x,y)= x + 2 ln(y). The prices of food and clothes are px and py euros/unit, respectively, and the consumer's income is I euros. A. (10 points) Describe the consumer's problem, including her budget constraints, and calculate her ordinary demand functions, x(px,py,I) and y(px,py,I). B. (10 points) For prices and income (px,py,I)=(1,1,3), calculate the substitution and income effects over the demand of y of a...

Suppose a consumer has preferences given by U(X,Y) = MIN[2X,Y]. Suppose PX = 1 and PY...

Suppose a consumer has preferences given by U(X,Y) = MIN[2X,Y]. Suppose PX = 1 and PY = 2. Draw the Income Consumption Curve for this consumer for income values • M = 100 • M = 200 • M = 300 To do this, carefully draw the budget constraints associated with each of the prices for good X, and indicate the bundle that the consumer chooses in each case. Also, be sure to label your graph accurately.

Dr Pepper’s preferences can be represented by the utility function u(x,y) = x + y where...

Dr Pepper’s preferences can be represented by the utility function u(x,y) = x + y where x is his consumption of Coca Cola (hereafter, referred to as Coke) and y is his consumption of orange juice (hereafter, referred to as OJ). Initially, both types of drinks are not taxed and with an income of $12 he faces prices ($1, $2). On the advice of nutritionists, the government decides to impose a specific tax of $2 on Coke which leads to...

Consider a consumer with the utility function U(X, Y) = X^2 Y^2 . This consumer has...

Consider a consumer with the utility function U(X, Y) = X^2 Y^2 . This consumer has an income denoted by I which is devoted to goods X and Y. The prices of goods X and Y are denoted PX and PY. a. Find the consumer’s marginal utility of X (MUX) and marginal utility of Y (MUY). b. Find the consumer’s marginal rate of substitution (MRS). c. Derive the consumer's demand equations for both goods as functions of the variables PX,...

Suppose a consumer has a utility function given by u(x, y) = x + y, so...

Suppose a consumer has a utility function given by u(x, y) = x + y, so that the two goods are perfect substitutes. Use the Lagrangian method to fully characterize the solution to max(x,y) u(x, y) s.t. x + py ≤ m, x ≥ 0, y ≥ 0, where m > 0 and p < 1. Evaluate and interpret each of the multipliers in this case. What happens to your solution when p > 1? What about when p =...

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