8. Explain (i) how the standard (neoclassical) downward sloping demand curve is derived from the indifference curve and the budget constraint, and (ii) the meaning of the downward sloping demand curve. [Note: For (ii), you must include the type of the good considered. Mathematical notations may be used, if they are clearly defined in words.] (ch. 5)

8. Explain (i) how the standard (neoclassical) downward sloping demand curve is derived from the indifference curve and the budget constraint, and (ii) the meaning of the downward sloping demand curve. [Note: For (ii), you must include the type of the good considered. Mathematical notations may be used, if they are clearly defined in words.] (ch. 5)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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● 1. The table below lists 4 observations of price (Px) and quantity (Qx) for a product X, their respective averages or means, and the estimated Q values (Q*) based on a demand function (Q* = 208-0.1Px). Entry Px Qx Q* 1 $220 176 186 2 $520 147 156 a. Compute the TSS value for the observation above: 3 $480 153 160 b. Compute the SSE value for the observations above: 4 $580 144 150 5 $340 175 174 c. Compute the R² value (round to two decimals) based on your answers above and interpret its meaning: Mean $428 159
Question: Why does quantity supplied go up as price goes up? a)For a given time period, the marginal utility gained by consuming equal successive units of a good will decline as the amount consumed increases b)Because as price rises, producer profit rises, which induces producers to supply a larger quantitiy. c)Because people substitute lower-priced goods for higher-priced goods as price rises. d)Both (a) and (b) above
14)Why does quantity supplied go up as price goes up? * a)For a given time period, the marginal utility gained by consuming equal successive units of a good will decline as the amount consumed increases b)Because as price rises, producer profit rises, which induces producers to supply a larger quantitiy. c)Because people substitute lower-priced goods for higher-priced goods as price rises. d)Both (a) and (b) above
Questions 4 (Choice & Demand). Suppose a consumer's utility function is given by: U(xi, x2 ) = x" a) What is the consumer's demand for x, as a function of income and prices? What is the consumer's demand for x; as a function of income and prices? Use Lagrange method or your intuition. b) What percentage of income does the consumer spend on x;? What percentage of income does the consumer spend on x2?
11. A worker derives utility from consumption, C and leisure, L U = U(C, L) and initially faces the constraints p.C = N+w.H H = 24 - L where p is the nominal price of consumption, N> 0 is unearned income, w is the nominal wage and H is hours worked. (a) Derive the budget constraint in terms of C and L and show on a diagram an initial optimal choice of C and L, in which both are positive. (b) State this equilibrium algebraically, and briefly explain how it can be derived. (c) Show that, assuming normality of leisure, for some value N*, if N> N*, the individual will choose not to work. Is the initial level of N in your answers to parts a) and b) greater or less than N*?
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(29) The way that a firm combines inputs and factors of production in order to determine how much they can produce is represented by the firm’s Select one: a. profit function. b. cost function. c. production function. (30) Which of the following statements is true about total utility and consumer behavior? Select one: a. It steadily decreases with each additional purchase. b. It increases at a steady rate with every additional purchase. c. It increases with each additional purchase, but at a decreasing rate.
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1. An individual consumer's utility function and the budget constraint are described below. (ch. 5). U = xy s.t. m = Pxx+Pyy where, m = $100, Pz = $5, and py = $2. Note: 2 and y are the amount of x good and y good; m the amount of money, på the price of x good; Py the price of y good. (i) Find the marginal rate of substitution between x and y. (ii) Find the slope of the budget constraint (in value). [no need to draw the budget constraint.] (iii) Given the answers to (i) and (ii), find the optimal amount of each good, x* and y*. (iv) Find the level of utility obtained by this rational consumer. (v) Interpret the meaning of the answer you found in (iii) and (iv).
Principles of Economics 1 | S1 21/22 Time left 0:5) When the price of one good increases and the price of the other good and income are held constant, the budget line Select one: shifts parallel to the original budget line so that the new budget line is farther from the origin O b. shifts parallel to the original budget line so that the new budget line is closer to the origin rotates so that the intercept is farther from the origin on the axis representing the good that has experienced an increase in price O a. O c. O d. rotates so that the intercept is closer to the origin on the axis representing the good that has experienced an increase in price Next page
2. Suppose there are n identical consumers, each with a utility function u(x, y): = ax = x²+y. Each consumer has different disposable income w. The price of good x is p dollars, and the price of composite good y is equal to 1 dollar. Assume a > 0 and b > 0. (Hint: Question 1) (a) Calculate the marginal utility of good x and good y. Then, calculate the marginal rate of substitution between good x and good y. (b) Calculate the individual demand of consumer 1 for good x. (c) Calculate the aggregate demand for good x. (d) Draw a graph showing the market demand curve for good x. (e) Discuss whether an increase in disposable income for each consumer lead to an increase in the consumption of good x? This increase in disposable income can result from various factors, such as a decrease in taxes, government stipends, or other forms of income support. (f) Discuss the effect on demand for good x if there is an increase in the price of good x. This increase in the price of good x can result from…