Question

In: Economics

1.     Elmer is updating his summer wardrobe.  The amount of utility he gets from shirts and shorts is...

1.     Elmer is updating his summer wardrobe.  The amount of utility he gets from shirts and shorts is listed in the table below, where each number represents how much utility (in utils) he receives from the combination of shirts and shorts.

1 shirt

2 shirts

3 shirts

4 shirts

1 pair of shorts

15

27

37

46

2 pairs of shorts

26

37

45

51

3 pairs of shorts

35

45

51

55

        a.     What is the marginal utility from buying another pair of shorts if Elmer has three shirts and one pair of shorts?

        b.    What is the marginal utility from buying an additional shirt if Elmer has one shirt and three pairs of shorts?

        c.     What are two combinations of shirts and shorts that are on the same indifference curve?

        d.    What are two other combinations of shirts and shorts on the same indifference curve as each other but different from those combinations in your answer to c? Is this second set on a higher or lower indifference curve than those in c?

Solutions

Expert Solution

1.

a. The marginal utility from buying another pair of shorts if Elmer has three shirts and one pair of shorts:

Total utility when Elmer has three shirts and one pair of shorts= 37

If Elmer buy another pair of shorts then Elmer has three shirts and two pair of shorts. Then total utility= 45

Marginal utility= Change in total utility= 45-37= 8

b. The marginal utility from buying an additional shirt if Elmer has one shirt and three pairs of shorts:

Total utility when Elmer has one shirt and three pairs of shorts= 35

If Elmer buy an additional shirt then Elmer has two shirts and three pair of shorts. Then total utility= 45

Marginal utility= Change in total utility= 45-35= 10

c. Elmer has three shirts and two pair of shorts or two shirts and three pair of shorts. Then total utility remain same as 45 so these 2 combinations are on same Indifference curve.

d. Elmer has 4 shirts and 2 pair of shorts or 3 shirts and 3 pair of shorts. Then total utility remain same as 51 so these 2 combinations are on same Indifference curve.

As Combinations in part c has lower total utility than the combinations in d so Second set(in d) is on higher indifference curve than those in c.

Rahul Sunny answered 2 years ago
Next > < Previous

Related Solutions

1. Tim gets utility from only two goods, rice (R) and beans (B). One of his...
1. Tim gets utility from only two goods, rice (R) and beans (B). One of his indifference curves is given by the formula XR . X2B = 64, where XR and XB are the quantities of rice and beans. a. Give two examples of bundles that lie on this indifference curve, with whole-number quantities of both goods. b. Suppose Tim currently has a bundle on this indifference curve, with 2 units of beans. Use derivatives to calculate the rate at...
Bob is deciding how much labour he should supply. He gets utility from consumption of beer...
Bob is deciding how much labour he should supply. He gets utility from consumption of beer (given by C) and from leisure time (given by L), which he spends hanging out with his friend Doug. This utility is given by the following utility function: U(C, L) = ln(C) + θ ln(L) where the value of θ was determined by your student number and ln(C) denotes the natural logarithm of consumption etc. Given this utility function, Bob’s marginal utility from consumption...
Suppose that Tim gets utility from only two goods, rice (R) and beans (B) and his...
Suppose that Tim gets utility from only two goods, rice (R) and beans (B) and his preferences are represented by the utility function U(R,B) = R^2 * B^5. If Tim's income is 42 and price of rice is 1, price of beans is 3. How many units of rice and beans will he choose? Tim’s income elasticity of demand for beans? Explain clearly plz.
Your father is retired and living on his pension benefits and the interest he gets from...
Your father is retired and living on his pension benefits and the interest he gets from savings. However, the interest income he receives has dwindled to only 2 percent a year on his RM200,000 in savings as interest rates in the economy have dropped. You have been thinking about recommending that he purchase some corporate bonds with at least part of his savings as a way of increasing his interest income. Specifically, you have identified three corporate bond issues for...
Your father is retired and living on his pension benefits and the interest he gets from...
Your father is retired and living on his pension benefits and the interest he gets from savings. However, the interest income he receives has dwindled to only 2 percent a year on his RM200,000 in savings as interest rates in the economy have dropped. You have been thinking about recommending that he purchase some corporate bonds with at least part of his savings as a way of increasing his interest income. Specifically, you have identified three corporate bond issues for...
Amir Labib gets a reduced rate from his auto insurance company because he represents in his...
Amir Labib gets a reduced rate from his auto insurance company because he represents in his application that he commutes less than ten miles a day to work. Three years later, he and his wife buy a new residence, farther away from work, and he begins a fifteen-mile-a-day commute. The rate would be raised if he were to mention this to his insurance company. The insurance company sees that he has a different address, because they are mailing invoices to...
1. Joe is currently unemployed and without health insurance coverage. He derives utility (U) from his...
1. Joe is currently unemployed and without health insurance coverage. He derives utility (U) from his interest income on his savings (Y) according to the following function: U = 5(Y1/2) Joe presently makes about $40,000 of interest income per year. He realizes that there is about a 5 percent probability that he may suffer a heart attack. The cost of treatment will be about $20,000 if a heart attack occurs. A. Calculate Joe’s expected utility level without any health insurance...
QUESTION 20 Mandy gets utility from consuming nutella and doritos. Her utility function is of the...
QUESTION 20 Mandy gets utility from consuming nutella and doritos. Her utility function is of the following form: U = 50 Doritos + 87 Nutella The price of nutella is $63 per jar, the price of doritos is $16 per bag and her income is $3,931 What is the MRS(doritos, nutella)? QUESTION 21 The utility function and the prices are the following: U =min{ 80 x1 , 12 x2} P1=50,   P2=52 and I =5,157 What is the optimal amount of...
A telephonist claims that he gets 10 calls every five minutes. To demonstrate this to his boss he makes a tape lasting five minutes. What are the probabilities that he gets:
Question 7A telephonist claims that he gets 10 calls every five minutes. To demonstrate this to his boss he makes a tape lasting five minutes. What are the probabilities that he gets:(a) no calls in the five minutes; (2)(b) less than three calls; and (5)(c) exactly 10 calls? (2) [9] Question 8Assume that matric marks are standardised to have a mean of 52% and a standard deviation of 16% (and assume that they have a normal distribution). In a class...
Suppose a person has the utility function U=x^.75 and makes $52,000. If he gets the flu,...
Suppose a person has the utility function U=x^.75 and makes $52,000. If he gets the flu, he will have to miss work for a week, costing him $1,000. His probability of getting the flu is 15%. Compare the following scenarios and rank his preferences over them: His current situation Participate in the company’s sick day program where $500 of his salary is withheld (regardless of whether he gets sick) but if he gets sick for a week he doesn’t loose...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT