ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
Bartleby Related Questions Icon

Related questions

Q: think about a time when you experienced diminishing marginal utility. Then write your own example…
A: The notion of marginal utility in economics describes the extra pleasure or benefit that a customer…
Q: Which of the following goods is likely to provide both the largest total utility and the smallest…
A: Total utility refers to the total amount of satisfaction derived from consuming a good. Marginal…
Q: Explain one difference and one example between the Cardinal utility and ordinal utility!
A: Cardinal utility is a Marshallian concept used along with an ordinal utility to gauge the…
Q: What economic concept determines when you should stop eating wings?
A: Introduction Utility as a concept is widely used to theorize many of the popular economic concepts.…
Q: Imagine there is an outbreak of 'mad sheep' disease, which wipes out a considerable portion of the…
A: a) Two factors occur when the price of haggis rises that will influence how many (units) of haggis…
Q: The satisfaction that comes from making a choice or consuming a good or service is called focus…
A: The subject of economics focuses on how societies distribute scarce resources to meet seemingly…
Q: ou are having lunch at an all-you-can-eat buffet. If you are rational, what should be your marginal…
A: 1. What is Marginal Utility?Marginal utility is the fulfillment or advantage you gain from devouring…
Q: With a total budget available of $56.00, what does the utility-maximizing rule tell you the optimal…
A: We can easily see if we take 2 quantity each that is 2*14+2*14 = 28+28 = $56 which is within our…
Q: utility positive? Explain. 3. Suppose Mary is in consumer equilibrium. The marginal utility of good…
A: The state where an individual gets the most value or satisfaction from the goods and services…
Q: Scott loves to go to baseball games, especially home games of the Cincinnati Reds. All else equal,…
A: The net benefit of a project is determined by totaling its benefits and subtracting all of its…
Q: Based on the table below, what is the marginal utility from the 2nd unit? UNITS TOTAL UTILITY 1…
A: Marginal utility =change in the total utility from that unit of consumption  Marginal utility from…
Q: 1. Using the following information, calculate total utility and marginal utility. a. Plot the total…
A: The utility is the wants satisfying power of a product. Total utility is the total amount of…
Q: Matt wants to buy the Economics text book with nect Plus College-CyFair bookstore. The economic…
A: The marginal cost of a good refers to the change in cost when an additional unit is produced.  The…
Q: Gilberto's reservation prices for tubs of hummus are given below. Q (Tubs) 1 2 3 Answer: 4 5 6…
A: The consumer consumes only two goods, and reaches at equilibrium only if they allocate its income on…
Q: To maximize total utility, consumers will always choose the marginal unit of the good that yields…
A: Utility maximisation implied the concept that individuals and firms seek to get the highest…
Q: The utility of a good or service Multiple Choice O O O is synonymous with usefulness. is the…
A: Consumer theory is referred to the study of how an individual decides on spending their wealth on…
Q: The following table shows the total utility that Antonio receives from consuming different number of…
A: Marginal utility is the extra utility received from purchasing one extra unit. Marginal utility of…
Q: How would a fresh produce vendor at the farmers' market create the four types of utility (form…
A: Utility basically refers, how the person or an consumer make use of goods or commodities for their…
Q: Total utility (utils) 0 80 120 148 160 155 Quantity consumed per day 0   1     2     3…
A: Quantity consumer per day Total utility (utils) 0 0 1 80 2 120 3 148 4 160 5 155
Q: 26. The set of all the alternatives a consumer can afford is shown by a) an indeffirence curve b)…
A: Microeconomics can simply be defined as the study of people's and enterprises' decisions about…
Question

help me solve part b) of this excersise.

1. This question will let you examine/explore a more interesting utility func- tion than the simple example discussed in class as there will be both cross-price elas- ticity and an inferior good. Suppose you are told a consumer has the following utility function: U (9219₂) = 9z+√9z+ 9₂ You should assume income is Y, the price of good r is P2, and the price of good z is P₂. This question will ask about several concepts discussed in lecture. (a) What is the Marshallian demand for goods x and z? I.e. find (qq) for both interior solutions and corner solutions. Note: the outcome is "ugly" for the interior section and both corner should include constraints, i.e. limits using Y relative to f(P, P₂). Hint: if solving using MRS = MRT, can use this information again in part (d). (b) Suppose you are told P₂ = $8 and P₂ = $1. Create a graph showing the Income Consumption Curve (ICC) for Y = {$12.25, $35, $49, $70, $98). Be sure to clearly label the graph. Based on the ICC, which of the goods is the inferior good? Note: this should help with the corner solutions found in part (a), i.e. you should be able to check the "criteria," i.e. Y vs f(P, P₂). (c) Graph the Engel curve for good z from Y = $0 to Y = $100 given P₁ = $8 and P₂ = $1. Hint: there should be 3 parts as the demand function has 3 parts with the changes to the Engel curve consistent with the outcome in part (b). (d) Find the Hicksian Demand for the interior solutions as a function of Pr, P₂, and Ū, i.e. find (qq). What is the Expenditure function E(P, P₂, Ū)? Hint: you can use MRS = MRT you found in part (a) and solve for q₂ = f(qz, PT, P₂) as this will make finding a solution much easier. (e) Using from part (a) and q from part (d) with P₂ = $8, P₂ = $1, and Y = $70 find what the Substitution Effect and Income Effect from a +$0.05 change in the price of good z. Does your answer make sense? Explain why or why not. Note: values for q with P₂ = {$0.95, $1.05} are not "nice" values and you should include 4 decimal places when giving the answer. (f) Suppose the consumer's income remains Y = $70, but the price of good x increases to P₁ = $18 and the price of good z increases to P₂ = $2. What is the Compensating Variation? What is the Equivalent Variation? Note: given you found the Expenditure function in part (d), this should be relatively straight forward.
expand button
Transcribed Image Text:1. This question will let you examine/explore a more interesting utility func- tion than the simple example discussed in class as there will be both cross-price elas- ticity and an inferior good. Suppose you are told a consumer has the following utility function: U (9219₂) = 9z+√9z+ 9₂ You should assume income is Y, the price of good r is P2, and the price of good z is P₂. This question will ask about several concepts discussed in lecture. (a) What is the Marshallian demand for goods x and z? I.e. find (qq) for both interior solutions and corner solutions. Note: the outcome is "ugly" for the interior section and both corner should include constraints, i.e. limits using Y relative to f(P, P₂). Hint: if solving using MRS = MRT, can use this information again in part (d). (b) Suppose you are told P₂ = $8 and P₂ = $1. Create a graph showing the Income Consumption Curve (ICC) for Y = {$12.25, $35, $49, $70, $98). Be sure to clearly label the graph. Based on the ICC, which of the goods is the inferior good? Note: this should help with the corner solutions found in part (a), i.e. you should be able to check the "criteria," i.e. Y vs f(P, P₂). (c) Graph the Engel curve for good z from Y = $0 to Y = $100 given P₁ = $8 and P₂ = $1. Hint: there should be 3 parts as the demand function has 3 parts with the changes to the Engel curve consistent with the outcome in part (b). (d) Find the Hicksian Demand for the interior solutions as a function of Pr, P₂, and Ū, i.e. find (qq). What is the Expenditure function E(P, P₂, Ū)? Hint: you can use MRS = MRT you found in part (a) and solve for q₂ = f(qz, PT, P₂) as this will make finding a solution much easier. (e) Using from part (a) and q from part (d) with P₂ = $8, P₂ = $1, and Y = $70 find what the Substitution Effect and Income Effect from a +$0.05 change in the price of good z. Does your answer make sense? Explain why or why not. Note: values for q with P₂ = {$0.95, $1.05} are not "nice" values and you should include 4 decimal places when giving the answer. (f) Suppose the consumer's income remains Y = $70, but the price of good x increases to P₁ = $18 and the price of good z increases to P₂ = $2. What is the Compensating Variation? What is the Equivalent Variation? Note: given you found the Expenditure function in part (d), this should be relatively straight forward.
Expert Solution
Check Mark
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
bartleby
This is a popular solution
See solutionCheck out a sample Q&A here
Step 1: Define Income consumption curve
VIEW
Step 2: Find the points of Income Consumption curve
VIEW
Solution
VIEW
bartleby

Trending nowThis is a popular solution!

bartleby

Step by stepSolved in 3 steps with 2 images

See solution
Check out a sample Q&A here
Blurred answer
Knowledge Booster
Background pattern image
Economics
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
Recommended textbooks for you
Text book image
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:9780190931919
Author:NEWNAN
Publisher:Oxford University Press
Text book image
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Text book image
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Text book image
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Text book image
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Text book image
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education
SEE MORE TEXTBOOKS