wasi's utility function is U(x₁, x₂)=5(In x₁)+x₂. Given her current income and the current relative prices, she consumes 10 units of x₁ and 15 units of x₂. If her income doubles, while prices stay constant, how many units of x₁ will she consume after the change in income? a)10 b)20 c)1

wasi's utility function is U(x₁, x₂)=5(In x₁)+x₂. Given her current income and the current relative prices, she consumes 10 units of x₁ and 15 units of x₂. If her income doubles, while prices stay constant, how many units of x₁ will she consume after the change in income? a)10 b)20 c)1

Microeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506893

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter7: Consumer Choice And Elasticity

Section: Chapter Questions

Problem 4CQ

See similar textbooks

Similar questions

Tom's income is 32. He consumes a single consumption good, C, which has a price of 2. His utility function depends on his marital status: when happily married, his utility is given byU=C^(1/2) When he is not married, his utility is given by U=0.5C^(1/2) a. Suppose that Tom is not currently married. What is his utility? Now suppose that Tom gets married.What is his utility? Assume Tom can spend all his income on his own consumption when he is married. b. Use compensating variation (CV) and equivalent variation (EV) to calculate the value of marriage to Tom. How do the two figures compare?
EXERCISE 7 Aisha is considering how to allocate the next 6 hours of her free time. She could choose between leisure (L) and helping her neighbour with the house chores. If she decides to help her neighbour, she is going to get paid at £25 per hour, which she can then spend on her favourite pizza (P). Suppose the price of pizza is £12.50. Aisha's preferences for leisure and pizza are given by the following utility function: U(L, P) = 3L + P. (MU₁ = 3, MUp = 1). a) Write down Aisha's budget equation and draw the corresponding budget line. Clearly label the axes and calculate the coordinates of the points of intersection of the budget line with each axis. b) Calculate Aisha's marginal rate of substitution between leisure and pizza. Explain the concept of MRS and interpret the figure obtained. c) Find Aisha's optimal consumption bundle, both algebraically and graphically. Explain your reasoning. d) Would Aisha's optimal choice change if she could get a discount on her pizza purchases so…
A basket of goods for a given consumer includes two goods, X and Z. Consumer income is equal to $1,500 and the prices of these two goods are as follows: P= $20 P, = $25 This consumer is consuming 10 units of good X. Suppose that over the course of a year, the price of good X changes by 10% and the price of good Z changes by - 10%. How much income would be required for the consumer to afford the same quantity of goods X and Z with the new prices? S
QUESTION 1 For the utility function U = Qx0.50Qy(1-0.50) and the budget 122 = 8Qx + 14Qy find the CHANGE in optimal consumption of Y if the price of Xincreases by a factor of 1.7. Please enter your response as a positive number with 1 decimal and 5/4 rounding (e.g. 1.15 1.2, 1.14 = 1.1).
Henry's utility function is u(x,y)=max{x+3y,3x+y}. (a) Suppose Henry's current consumption bundle is (2,1.5), what is his current utility level? If he consumes the bundle (1.5,2), will his utility change from the current utility level?
A basket of goods for a given consumer includes two goods, X and Z. Consumer income is equal to $1,500 and the prices of these two goods are as follows: Px = $25 Pz = $25 This consumer is consuming10 units of good X. Suppose that over the course of a year, the price of good X changes by 10% and the price of good Z changes by −10%. How much income would be required for the consumer to afford the same quantity of goods X and Z with the new prices? $______
Question 2 David spends his budget on chocolate and chip. His utility function is given by ?(?1,?2)= 2?1?2, where ?1 is the number of chocolates he consumers per week, and ?2 is the number of chips he buys per week. A chocolate costs 10 SEK, and a chip costs 20 SEK. David’s weekly budge for consuming on these two goods is 120 SEK. (1) What is David’s budge line? Draw the budget line on a graph with chocolate amounts on the horizontal axis and chip amounts on the vertical axis. Write explicitly at which points budget line crosses the axis. (2) What is David’s marginal utilities for the two goods, respectively? What is his marginal rate of substitution between the two goods? (3) What is David’s optimal choice? Calculate the numerical answer for the optimal bundle. Also draw an indifference curve for David on the same graph as question(1) and show the optimal bundle.
Rui's utility function is Let the price of good X be px, the price of good Z be normalized to $1.00, and U be her level of well-being. What is her expenditure function? Rui's expenditure function (E) is E = 2. U=X+4XZ+Z. PX(U+0.25) 2 - 0.25 (Px +1) · (Properly format your expression using the tools in the palette. Hover over tools to see keyboard shortcuts. E.g., a subscript can be created with the _ character.) Derive her unco pensated demand curve for X. Let Y be her income. Rui's uncompensated demand curve for good X is (Properly format your expression using the tools in the palette.) X=
Given an individual’s current consumption patterns, we know that the person is consuming in such a manner that he is maximizing his satisfaction. Given a decrease in the price of one of the goods he normally purchases, what will happen to the consumer’s total satisfaction and to the marginal utilities connected with the consumption of this particular good. a) His overall satisfaction will increase, but his satisfaction from the last unit consumed of the good with a decreased price will decrease. b) His overall satisfaction will decrease and his satisfaction from the last unit consumed of the good with a decreased price will decrease. c) His overall satisfaction will increase and his satisfaction from the last unit consumed of the good with a decreased price will increase. d) His overall satisfaction will decrease and his satisfaction from the last unit consumed of the good with a decreased price will increase. e) We cannot tell about the changes in his total utility or his marginal…
Brian spends his entire monthly income of $1200 on shoes (S) and pizzas (P). The price of a pair of shoes is $60, and the price of a pizza is $20. If he consumes 10 pairs of shoes and 30 pizzas, his MRS is 2P/1S. (A quantity of shoes is measured along the x-axis, and a quantity of pizza is measured along the y-axis.) His choice is optimal. True False
1. For the utility function U(x,, x2) = x9.4x9.6, calculate EV, Cv and ACS for an increase in P1 from $1 to $2. Assume p2 1, and m = 100.
A consumer is choosing between magazines and books. His set of consumer optimums are shown on the graph to the right. 50 Consumer income allocated for these two goods is equal to $150. The price of 45 magazines (P,) is equal to $5.00. 40- How do these changes in the price of books affect the demand for magazines? 35- 30- 25 NN 20- demand remains constant 15- PCC demand increases 10- 5- demand decreases 0- Ó 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 Books étv 21 MacBook Air 80 DII F5 F6 F7 F8 F9 F10 F1 F2 F3 ! @ $ & * 1 2 3 4 6. 7 Q W E T U A S F H. J K L C V M option command command op ...- * C0 Magazines D