1. Consider a consumer with the utility function u(x, y) = 2x¹/2 + y, an income of I = Rs100, and price of good y is Rs 1. A) Find the demand functions for goods x and y. B) If, ceteris paribus, price of good x decreases from Rs 4 to Rs 3, what is the compensating variation?

1. Consider a consumer with the utility function u(x, y) = 2x¹/2 + y, an income of I = Rs100, and price of good y is Rs 1. A) Find the demand functions for goods x and y. B) If, ceteris paribus, price of good x decreases from Rs 4 to Rs 3, what is the compensating variation?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: 1. John spends PLN 60 per week on two goods: x and y. The price of good x is PLN 2 and the price of…

A: Part (b)Problem:What will happen if Piotr's income increases by PLN 6 per week? What will be the new…

Q: Suppose that good I is an inferior good and good 2 is a normal good. It has been found that a…

Q: Explain / Define the terms? a) Marginal utility b) Price c) Supply

Q: 1) Suppose the consumer begins in equilibrium at eo. If there is an increase in income and good X is…

A: Normal Good: A normal good is a good that exhibits a positive relationship between income and…

Q: In class, we dicussed that if c and c' are normal goods, then the income effect for these two goods…

A: An inferior good is a good whose demand decreases as people's incomes rise. When incomes and the…

Q: The marginal utility of a consumer for a particular good, measured in £, is 100-Q. Suppose the price…

A: Marginal utility describes the additional satisfaction or benefit (utility) a consumer derives from…

Q: Help!

A: Now, we will examine each component more thoroughly: (a) Budget Constraint: The budget constraint…

Q: 2) A consumer’s utility function is: U(x,y) = sqrt(9xy). The price of each good is: (PX,PY) =…

A: Optimal consumption bundle: The optimal consumption bundle is such that at that bundle the…

Q: PROBLEM (7) A consumer with I dollars budget has the utility u(x,y) = x(y+1) over amounts of cake…

A: A person's preferences and level of satisfaction from consuming various products and services are…

Q: Good X costs $8 and good Y costs $4 per unit. His utility function is U = 4.5XY. (a) Calculate Moe's…

A: here we calculate the Moes's utility maximizing purchases of X and Y and constrained utility maximum…

Q: PROBLEM (5) A consumer with I dollars budget has the utility u(x,y) = x(y+1) over amounts of cake…

A: This can be described as the concept that shows the effect of change in the price of one good on the…

Q: Jane consumes two goods, shoes, s, and housing, h. Her income is M and the prices = s¾/³h¾/3 of s…

A: Thank you for the question. As per the guidelines, 3 subparts can be solved per session. To get…

Q: Thomas spends his entire food budget on soup and pasta. His preferences are complete, transitive,…

A: In Microeconomics, price effect is the summation of substitution and income effect. When a consumer…

Q: 8. Suppose there are 2 goods in the economy and the demand function for Good 1 is given by m P₁ +…

A: The demand for normal items increases as consumer income increases. In contrast to normal products,…

Q: 1.There are two goods F and C. Let MU and P denote marginal utility and price of each good.…

A: Price effect consists of income effect and substitution effect. Substitution effect is always…

Q: please help

A: Consumer equilibrium condition: Slope of Indifference Curve = Slope of Budget Line Marginal Rate of…

Q: 4. Suppose pizza (P) and hamburgers (H) are perfect substitutes for Bingbing. She is always willing…

A: Hello, thank you for the question. Since there are multiple sub-part questions asked here, only the…

Q: then how much compensating and equivalent variations?

Q: Assume X = $1 and Py = $2 and the consumer has income M = $10. Illustrate the consumer’sbudget…

Q: Suppose that consumers experience a 5 percent increase in income and purchasing walking shoe…

A: Income elasticity helps to determine whether the good is normal or inferior. Income elasticity…

Q: Suppose that a consumer’s utility function for two goods (X and Y) is U(X,Y) = 10X^0.5 + 2Y , with…

A: Utility Function : 10x0.5 + 2Y Px = 5 (Price of x ) Py 10 (Price of y ) Income = m = 275…

Q: 3 8. Let be the utility function U(x, y) =(xi+ 2yä), , where x and y are the quantities consumed of…

A: Introduction We have given a utility function of two commodities x and y. Here given utility…

Q: 2. Linus has the utility function U (x; y) = 2x2+y. The price of both goods is 1 euro and income are…

A: The utility function is quasilinear in x. Good x is a necessity. U(x; y)=2x+yPrice of both goods is…

Q: 1. Consider that an individual take utility from the consumption of good x and y according to the…

A: The study of consumer behavior focuses on how people and families choose what to buy while taking…

Q: A consumer has the following utility function: Ulx, y) = xy -y: *21 where x and y represents the…

A: Substitution effect refers to substituting the consumption of the consumer from one good to another…

Q: 3. Suppose a consumer has inverse demand given by p-12-29. a. At what price per unit does the…

A: The law of demand states that there is an inverse relationship between the price and quantity…

Q: 2) A consumer’s utility function is: U(x,y) = sqrt(9xy). The price of each good is: (PX,PY) =…

A: ***Since the student has asked to solve a specific part of the question, hence, the expert is…

Q: Muhammad's perceives canned tuna (Y) as an inferior good and fresh tuna (X) as a normal good. If his…

A: Inferior good refers to the good that faces in fall in demand when the income rises, and if the…

Q: The following table shows the amounts of additional satisfaction (marginal utility) that Ross would…

A: Utility is defined as the usefulness or the satisfaction a consumer derives from a good or service…

Q: a) Suppose price of x₁ falls to Rs. 3, will its quantity demanded increase? Why? 5) Now suppose P₂…

A: Given:a) Suppose the price of x1 falls to Rs. 3, will its quantity demanded increase?…

Q: Suppose you have following utility function :U(x,y)=(x“ + yª )a where x > 0, y > 0 anda ± 0,a 0 and…

A: We will use utility maximization method to answer this question

Q: Consider a linear demand curve D(p) = 60 - 3p. 1. Draw this demand curve on a graph. 2. When the…

A: demand refers to the consumer's desire to purchase a particular good or service.

Q: Info in images

A: Answer: (1). Given, Lisa's marginal utility per slice of pizza=20 Her marginal utility per…

Q: Illustrate and explain how consumer equilibrium is achieved using the indifference curve? Discuss…

A: "Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Sally consumes two goods, X and Y. Her utility function is given by the expression U = 3XY². The…

A: An indifference curve depicts the combination of two products in several quantities that gives an…

Q: 2. Donald derives utility from only two goods, carrots (X) and donuts (Y). His utility function is…

Q: Ursula's utility function is In(x) + 5y, her income is 12, and both prices are 1. (a) What is her…

A: The above utility function is a quasi-linear utility function where utility depends linearly on one…

Q: 21. A consumer has a utility function defined over two goods X and Y. Let the quantity of Good X be…

A: A utility function is a mathematical representation that quantifies an individual's or a…

Q: 4. Tim wants to maximise his utility given his utility function of U (A, B) = A² B¹. He faces 20; M…

A: Utility is maximised by consuming the bundle where ratio of marginal utilities is equal to ratio of…

Q: Ursula's utility function is In(x) + 6y, her income is 12, and both prices are 1. (a) What is her…

A: The utility function is a quasi linear utility function, where demand for one good does not depend…

Question

1/2
Consider a consumer with the utility function u(x, y) = 2x¹2 + y, an income of I = Rs 100, and
price of good y is Rs 1.
A) Find the demand functions for goods x and y.
B)
If, ceteris paribus, price of good x decreases from Rs 4 to Rs 3, what is the compensating
variation?
1.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Introduction

VIEW

Step 2: Demand Functions

VIEW

Step 3: Compensating Variation

VIEW

Solution

VIEW

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

b. A consumer purchases two goods, the amounts of which are x and y. Her marginal utility of consuming good x is Ux , while that of consuming good ? is Uy. If the two marginal utility functions are given by Ux = y2 + 2xy and Uy = 4xy + 3x2 − 3 and the consumer is known to stay on the same utility curve, find the total utility function of this consumer buying the two goods
1. Suppose that the demand function is y=-3x + 54. A. What is the highest price a consumer would pay for the commodity? B. What is the quantity demanded if the commodity is offered for free?
2
4. John has a utility for the quantity of sandwiches, Xs, and quantity of burgers, Xp, that he consumes, represented by the following equation: U(X,X) = XX His income is Y = $24. The price of a sandwich changes from X, = $1 to X, = $4 while the price of a burger remains at X, = $6. Solve for the compensating variation and equivalent variation associated with this price increase.
4.
When Sam has an income of 1.000 , he consumes 30 units of good A and 50 units of good B After Sam's income increases to $1,500 , he consumers 60 units of good A and 40 units of good B. Which of the following statements is correct ? a- Good A is a normal good and good B is an inferior good b- Both goods A and B are inferior goods c- Good A is an inferior good, and good B is a normal good d- Both goods A and B are normal goods
Considering the following Diagram of consumer equilibrium, answer the following questions. If consumer has $100 to spend on X and Y at Budget line DE, what are the prices of X and Y products. What combination of X & Y maximizes the consumer’s total utility at Budget line DE? Why a consumer has moved to point B on Budget line DE1 from Point A of Budget line DE? Derive the demand curve of X product. What is relationship between X and Y products
Which of the following statements is TRUE regarding the relationship between Complimentary Goods? a An increase in the price of syrup will decrease demand for pancakes b An expected storm will decrease demand for umbrellas c A decrease in the price of chicken will increase demand for beef d A price increase in pancakes will decrease demand for pancakes
1. Suppose that a representative individual has the following utility function U(x, y) = xªyß The price of good x is Php 40 and the price of good y is Php 20. The individual's income is Php 160. a. Calculate the income elasticity of demand for good x. Is good x a normal or an inferior good? b. Calculate the compensated cross-price elasticity of demand for good x with respect to the price of good y and interpret your result.
Question In the utility function above, x and y are substitutes.The Consumer Maximization Problem is as follows:Max(x;y)=5x + 6y subject to x + 2y = 10, We know MRSxy=5/6, find it by setting U(x, y) = U¯ and solving the utility function for y and what is the price ratio? Full explain this question and text typing work only thanks
4. Suppose that a consumer with the utility function U =X0.25 Y0.75 choses a bundle where X=5 and Y=10. If the prices of the two goods are Px= $1, and Py = $3. Calculate marginal utility per dollar spent on each good. Can this consumer increase utility without increasing expenditure and if so how?
2 3 1. The consumer has Cobb-Douglas preferences for two goods x and y: u(x, y) = 10x¾yš Py> 0 and m > 0 is given. a) Set up the Expenditure Minimization Problem. b) Calculate MU and MUy. Ꮖ c) State the condition that explain why Cobb-Douglas preferences will guarantee an interior solu- tion. c) Give the two optimality conditions for x and y. i) ii) Px > 0, e) Solve for the compensated demand functions for good x and y.