Carla has utility function U (x, y) = vx + 2y over goods x and y a) Do we have a name for this type of utility function? Are Carla's preferences well-behaved? b) Let Carla have budget I=$40, and let prices be Px=$2, Py=$8. What bundle will Carla consume? c) What if Carla's budget drops to $20? [Think about: could this utility function describe Carla's preferences over bread and ice cream?]

Carla has utility function U (x, y) = vx + 2y over goods x and y a) Do we have a name for this type of utility function? Are Carla's preferences well-behaved? b) Let Carla have budget I=$40, and let prices be Px=$2, Py=$8. What bundle will Carla consume? c) What if Carla's budget drops to $20? [Think about: could this utility function describe Carla's preferences over bread and ice cream?]

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider a consumer that consumes 2 teaspoons of sugar with each cup of coffee. For each cup of coffee with sugar the consumer gains 10 utils. a)Write down the utility function that gives the total utility if the consumer consumes S teaspoons of sugar and C cups of coffee. The consumer has assigned £7 per week to be spent on drinking coffee with sugar. The current price of coffee is £0.50 per cup and each spoon of sugar costs £0.10. b)Calculate the optimal weekly consumption bundle for this consumer. c)Does the consumer view C and S as complements or substitutes?
2. Suppose John's utility function is UX,Y) = 4/XY , where X is consumption of beer and Y is consumption of pizza. For this utility function, ( Calculus Kahuna say: MUx = 2Y/X and MUy = 2\X/Y ) a) Suppose Y=3. Calculate John's utility for X=4,9,16, and 25. For a given level of Y, does good X display diminishing marginal utility?
Suppose Lucia has to choose between purchasing high-definition televisions and water. Which of the following is the utility-maximizing rule that Lucia should follow while choosing the optimal quantities of these two goods? (Note: In the answer options that follow, MU stands for "marginal utility.") DO (MU of Water) x (Price of Water) - (MU of HDTVs) x (Price of HDTVs) O MU of Water - MU of HDTVs MU of HDTVs MU of Water Price of HDTVs Price of Water O MU of Water Price of Water MU of HDTVs Price of HDTVs Since water costs little and high-definition televisions are expensive, it must follow that when people choose their optimal quantities of water and high-definition televisions to purchase, the marginal utility they receive from the last high-definition television they buy is than the marginal utility they receive from the last gallon of water they buy.
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Miss Coco consumes cheese cake and curry puff. Her consumption yields the following total utility as shown in the given table. Miss Coco has RM52 to spend. Suppose that the prices of cheese cake and curry puff are RM8 and RM4, respectively. Quantity (units) Total Utility Cheese Cake Curry Puff 1 56 32 2 104 60 3 136 84 4 160 104 5 170 116 6 176 126 7 178 134 What is the total utility received by Miss Coco at equilibrium?
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You consume music (M) and concert tickets (C). Your utility function is U(M, C) = M1/4C3/4. The marginal utility for concert tickets, MUC is MUC =3/4C-1/2M1/4 and the marginal utility for music, MUM is MUm = 1/4C3/4M-3/4 (a) Calculate MRSMC using only the given marginal utilities. (b) Solve for the utility of bundle A where M = 16 and C = 16. Solve for your utility at bundle B where M = 128 and C = 8. Are the utilities the same? (c) Calculate MRSMC at bundle A and at bundle B. Are they the same? (d) Are your indifference curves convex? Draw the ICs. Make sure to label the quantities of the consumption bundles, the axis, and the MRS at those bundles.
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CS 11 Economics
2. Ping receives a weekly allowance to purchase soda (x) and juice (y) at school. His preferences over these two goods can be represented by the utility function U(x,y) =0.5x+ 5lny where x represents the number of cans of soda and y represents the number of juice boxes. a) Given his preferences find his Marshallian demand functions for soda (x) and juice (y). b) Suppose that the price of a can of soda is $1.5 and that Ping has $30 to spend on soda and juice. Write Ping's demand curve for juice (y). Illustrate his demand curve. c) Suppose that the price of a box of juice is $1 (the price of soda and income remain $1.5 and $30, resp.). Use your demand functions to find his best bundle. In an indifference curve diagram illustrate his best bundle at these prices. For the remainder of the question assume that Ping's allowance (income) rises to $36 per week and the prices of the two goods are unchanged at Px= $1.5 and Py= $1. d) Use your demand functions to find his new best bundle. e)…
Sergei splits his consumption between baseball bats and cameras. The price of baseball bats rises. If Sergei responds to this price increase by reducing his purchases of cameras, does this imply that he has a stronger income effect or a stronger substitution effect? Explain. If Sergei responds to this price increase by purchasing fewer baseball bats but more cameras, does this imply that he has a stronger income effect or a stronger substitution effect? Explain.