a) The following information pertains to a consumption bundles (x₁, x2) and prices (P₁, P2) faced by a consumer in two time (b, t) periods. (pl. p) = (1,2), (x,x) = (1,2), (pi, p) = (1,1), (x,x) = (2,2) i. Calculate the Paasche and Laspeyres price and quantity indices. ii. Use the ideas of revealed preference to determine which bundle is better off for the consumer between bundle(x,x) and (x,x) using the indices you computed in (ei). b) YEAR P1 P2 m X1 X2 S1 S2 1 3.75 1.00 100 20 25 2 5.00 1.39 100 15 18 3 4.17 1.67 100 18 15 4 3.41 1.04 100 22 24 5 10.71 2.63 200 14 19 i. Calculate the expenditure's share on good one S1 and good two S2. (Reproduce table and fill in values for S1 and S2) ii. Assume that the individual has carried out optimal purchases of goods 1 and 2 and preferences are Cobb Douglas in nature. Estimate the utility function that is depicted by the expenditure pattern observed in the table. iii. calculate the utility associated with the consumption of goods one and two for the listed years. (fill in the values in the same table you reproduce in (i)). iv. Which year does the individual enjoy the highest utility in (iii). Utility

a) The following information pertains to a consumption bundles (x₁, x2) and prices (P₁, P2) faced by a consumer in two time (b, t) periods. (pl. p) = (1,2), (x,x) = (1,2), (pi, p) = (1,1), (x,x) = (2,2) i. Calculate the Paasche and Laspeyres price and quantity indices. ii. Use the ideas of revealed preference to determine which bundle is better off for the consumer between bundle(x,x) and (x,x) using the indices you computed in (ei). b) YEAR P1 P2 m X1 X2 S1 S2 1 3.75 1.00 100 20 25 2 5.00 1.39 100 15 18 3 4.17 1.67 100 18 15 4 3.41 1.04 100 22 24 5 10.71 2.63 200 14 19 i. Calculate the expenditure's share on good one S1 and good two S2. (Reproduce table and fill in values for S1 and S2) ii. Assume that the individual has carried out optimal purchases of goods 1 and 2 and preferences are Cobb Douglas in nature. Estimate the utility function that is depicted by the expenditure pattern observed in the table. iii. calculate the utility associated with the consumption of goods one and two for the listed years. (fill in the values in the same table you reproduce in (i)). iv. Which year does the individual enjoy the highest utility in (iii). Utility

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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