COURSE: MICROECONOMICS - CONSUMER THEORYPD: exercise resubmitted. Image attached A consumer B has a utility function of the form u(x1,x2)Vx1 + /2x2 where x1is the basic food basket and x, is utilities. In addition, he has an income of $ 980,000and the prices of food and utilities are $ 300,000 and $ 420,000 respectively. Basedon the above, answer:(a) Calculate the amount of food and utilities to be demanded by the consumer.b) Calculate the consumer's indirect utility function.c) Assume that the price of utilities is now $ 380,000; calculate the Hicksian demandsat this new price.d) The government does not want the price of utilities to decrease and prefers togive the consumer the monetary amount before the price change in c), so that hemaintains the same level of utility if the price had decreased. How much will thegovernment give?

Utility indicates the satisfaction consumers earn from consumption.

A consumer B has a utility function of the form u(x1,x2) = Vx1 + V2x, where x s the basic food basket and x, is utilities. In addition, he has an income of $ 980,00 and the prices of food and utilities are $ 300,000 and $ 420,000 respectively. Base on the above, answer: a) Calculate the amount of food and utilities to be demanded by the consumer. O) Calculate the consumer's indirect utility function. c) Assume that the price of utilities is now $ 380,000; calculate the Hicksian demand at this new price. d) The government does not want the price of utilities to decrease and prefers t give the consumer the monetary amount before the price change in c), so that h maintains the same level of utility if the price had decreased. How much will the JOvernment give?

A consumer B has a utility function of the form u(x1,x2) = Vx1 + V2x, where x s the basic food basket and x, is utilities. In addition, he has an income of $ 980,00 and the prices of food and utilities are $ 300,000 and $ 420,000 respectively. Base on the above, answer: a) Calculate the amount of food and utilities to be demanded by the consumer. O) Calculate the consumer's indirect utility function. c) Assume that the price of utilities is now $ 380,000; calculate the Hicksian demand at this new price. d) The government does not want the price of utilities to decrease and prefers t give the consumer the monetary amount before the price change in c), so that h maintains the same level of utility if the price had decreased. How much will the JOvernment give?

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter21: Demand: Consumer Choic

Section: Chapter Questions

Problem 1E

See similar textbooks

Similar questions

Explain why it is that as the consumer purchases more of a good, her marginal utility falls while her total utility rises.
Eren’s two main hobbies are taking vacations overseas (V) and eating expensivemeals (M). His utility function is given as: U(V,M) = V2MLast year, the average price of taking a vacation overseas was US$200 and the averageprice of an expensive meal is $50. However, due to supply problems in Onions, theaverage price of an expensive meal rose to $75. The average price of a vacation did notchange. His income, which is $1500, did not change. Suppose that the Department of Welfare wants to know how much should begiven to Eren to offset his change un utility due to the price increase of an expensivemeal. Calculate the compensative variation (CV).
Eren’s two main hobbies are taking vacations overseas (V) and eating expensivemeals (M). His utility function is given as: U(V,M) = V2MLast year, the average price of taking a vacation overseas was US$200 and the averageprice of an expensive meal is $50. However, due to supply problems in Onions, theaverage price of an expensive meal rose to $75. The average price of a vacation did notchange. His income, which is $1500, did not change. Calculate for the equivalent variation (EV) for the price change.
Eren’s two main hobbies are taking vacations overseas (V) and eating expensivemeals (M). His utility function is given as: U(V,M) = V2MLast year, the average price of taking a vacation overseas was US$200 and the averageprice of an expensive meal is $50. However, due to supply problems in Onions, theaverage price of an expensive meal rose to $75. The average price of a vacation did notchange. His income, which is $1500, did not change. Calculate the change in consumer surplus from consuming the expensivemeals considering the price change (Hint: you need to compare his optimalconsumption bundle before and after the price change to get the change in CS).
Define Economic utility
Describe the point at which a consumer maximizes utility.
A student has a lunch utility function U(S, P) 8S + 3P, where S is number of salads per month and P is number of pizzas per month. The price of a salad is $5, the price of a pizza is 8, and his monthly income for lunch is $80. a) Derive the equation representing the consumer's demand for Salad. Represent the demand for Salad graphically. b) The price of Salad goes up to $25 and the price of Pizza does not change. Compute and represent graphically the new equilibrium of the student. What can you tell about the substitution effect on Salad and pizza
Jerry spends his entire budget on bread and gasoline. His preferences are complete, transitive, monotonic, and convex. For Jerry, bread is an inferior good that follows the law of demand. Moreover, his cross-price elasticity of demand for gasoline with respect to the price of bread is negative. Suppose the price of bread increases, all else constant. a. Create a chart to show the total, income, and substitution effects on bread and gasoline of the increase in the price of bread. b. Use budget lines and indifference curves to graphically illustrate the three effects. Be sure to label each effect on your graph (or through the chart from part a) and plot bread on the x-axis and gasoline on the y-axis
Anatoly's marginal utility for DVDS (D) is MU X and his marginal utility for Xbox games (X) is MUx D. Anatoly's income is $120, the price of a DVD is $20.00, and the price of an Xbox game is $10.00. How many DVDS and Xbox games does Anatoly consume to maximize his satisfaction? Anatoly consumesDVDs andXbox games. (Enter your responses using integers.)
A consumer’s weekly income is $5000, the price of a cell phone is $1250, and the price of a watch is $500. What quantity of cell phones and watches will maximize the consumer’s utility if they spend their entire weekly income on cell phones and watches? Explain your answer using marginal analysis. 1A. Suppose that this consumer’s income elasticity for watches is 5.4. what does this indicate about watches? If the cross-elasticity calculates to 0.8 what does this indicate about the relationship between watches and cell phones? 2 Determine and explain the Profit Maximization output of a perfectly competitive firm
Ray buys only hamburgers and bottles of root beer out of a weekly income of $100. He currently consumes 20 bottles of root beer per week, and his marginal utility of root beer is 6. The price of root beer is $2 per bottle. Currently, he also consumes 15 hamburgers per week, and his marginal utility of a hamburger is 8. Is Ray maximizing utility at his current consumption basket? If not, should he buy more hamburgers each week, or fewer?
Would you expect total utility to rise or fall with additional consumption of a good? Why?