2. Given the following information: U=XY; Px=5; Pr= 10; I= 200, a. mathematically_show the (i) substitution effect and (ii) income effect (in terms of changes in X and Y) when the price of good Y doubles.
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- If consumers buy less of a commodity when their incomes rise, this commodity is ( an inferior good , or a normal good ) ? . When the price of this commodity rises, the substitution effect is ( negative or postive) and the income effect is ( negative or postive) ? . So the net result for consumption of this commodity ( depends on which effect dominates , is an increase , is a decrease) ? .2. Given the following information: U = XY; PX = 5; PY = 10; I = 200, a. mathematically show the (i) substitution effect and (ii) income effect (in terms of changes in X and Y) when the price of good Y doubles. b. graphically illustrate your results in 2.a.1. Doug consumes two goods, electricity, e, and a composite commodity z. Doug has the following utility function: U = z²-e Last week, he clicked on a Facebook ad and got free solar panels put on his roof! Now Doug has solar panels on his roof that generate 50 units of electricity per day. For the going price of electricity, if Doug demands more than 50 units of electricity, he can buy more at that price. If he demands less than 50 units, he can sell the extra electricity (50 - his consumption) back to the grid, and earn the going price as extra income. a. What are his Marshallian demand functions for e and z? b. Currently, Doug's income is $100 per day, the price of z is $1 and the price of electricity is $0.50. How much electricity is he consuming and what is his utility? (note, the utility numbers may get a bit large). C Calculate quantity demanded for electricity and his utility if the price of electricity rises to $1. And then calculate the quantity demanded and utility when the…
- You are choosing between two goods, X and Y, and your marginal utility from each is as shown in the table below. If your income is $9 and the prices of X and Y are $2 and $1, respectively, what quantities of each will you purchase to maximize utility? What total utility will you realize? Assume that, other things remaining unchanged, the price of X falls to $1. What quantities of X and Y will you now purchase? Using the two prices and quantities for X, derive a demand schedule (price–quantity-demanded table) for X.B. Bob consumes two commodities: x and y (say, chocolate and classical music). More y never hurts, but in order to appreciate y he has to consume at least 4 units of it; put differently, he starts to enjoy y after the fourth unit. (In order to appreciate y he must first develop a taste for it.) Regardless of the amount of y he consumes, Bob thinks that more x is always strictly better than less. Moreover, he (strictly) prefers the bundle (x, y) over (x', y'), where both y and y' are at least 4, if and only if xxy > x' xy'. 1. Draw Bob's indifference curve(s) through the bundles: (2,6), and (6,2). (On each indifference curve indicate at least two bundles, one where the amount of y is less than 4 and one when this amount exceeds 4.) 2. Is Bob's preference convex? Is it strongly monotonic?If only the prices of goods in a two-good society quadruple, what will happen to the budget line? A Insufficient information is given to determine what effect the change will have on the budget line but we know society is worse-off. There will be no effect on the budget line. C The slope of the budget line may either increase or decrease. D The intercepts of the budget line will increase.
- suppose you have a fixed income of $3000 per month and you want to allocate your budget between two products: X and Y. Let's say the price of good x is $10 per unit, and the price of good y is $20 per unit. What is the budget constraint? Draw it on a graph and label the intercepts and the slope.4. 1).Find the marginal utility of each of the two commodities? If the two commodities are free, what are the consumed quantities of the two commodities? 2) .If the price of X is two Riyals and the price of Y is 4 Riyals, and the income is 32, find the equilibrium quantities? 3) .If the price of Y drops to two Riyals, find the equilibrium quantities? Explain the graph?John consumes 20 units of food and 24 units of clothing. If food is an inferior good, will John be indifferent between receiving a $24 gift certificate at a clothing store and receiving $24 in cash? Explain and show graphically.
- Economist George Stigler once wrote that, according to consumer theory, “if consumers do not buy less of a commodity when their incomes rise, they will surely buy less when the price of the commodity rises.” What kind of commodity was Stigler referring to? A normal good An inferior good When the price of this commodity rises, the substitution effect is (positive / negative) and the income effect is (positive / negative). So the net result for consumption of this commodity (depends on which effect dominates / is a decrease / is an increase).1. Suppose you earn $1500 per week and you consume only two types of goods per week- sandwiches and orange juice, which you purchase at a mini mart. Each sandwich cost $150 and an orange juice is $75 per cup. a) Construct a table showing the alternative combinations of the two products that are available. b)Plot the data in your table on a budget line. What is the slope of the budget line? What is the opportunity cost of one more cup of orange juice? And what is opportunity cost of one more sandwich? Do these opportunity cost rise, fall or remain constant as you purchase an additional unit of the product? c)Suppose the price of a cup of orange juice increased to $150. Construct a new table showing alternative combinations of sandwiches and orange juice. Construct the new budget line.Suppose Jane has $100$100 and is going to have a birthday party. She wants to order pizza and sushi. The price of a pizza is $6$6, and the price of one package of sushi is $8$8. Considering that she decided to spend $60$60 on pizza, how many pizzas and packages of sushi can Jane order? Enter your answer in the box below and round down to the nearest whole number if necessary; rounding your answer up may cause Jane to exceed her budget.