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Explain the difference between a utility function and correspondence
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- How is the ordinal utility concept different from the cardinal utility concept?Distinguish between cardinal and ordinal utilityuestion1:Donna and Jim are two consumers purchasing strawberries and chocolates. Jim’s utility function is U (x, y) = xy and Donna’s utility function is U (x, y) = x2y where x denotes strawberries and y denoteschocolates. Jim’s marginal utility functions are MUX=y and MUy=x while Donna’s are MUX=2xy and MUy=x2. Jim’s income is $100, and Donna’s income is $150. What is the optimal bundle for Donna if the price of strawberries is $2 and the price of chocolate is $4? What is the optimal bundle for Jim, and for Donna, when the price of strawberries rises to $3?Question2:Consider a one-period eco
- What is cardinal utility theory?From economic theory, the willingness of a consumer to give up consumption of one commodity (X) in exchange for an increase in some other commodity (Y) and remain equally satisfied can be mathematically calculated as their marginal utility of good X divided by their marginal utility of good Y. What is the economic term for this measure or concept?if the utility function is given by u=x^2y^2 what is marginal utility?
- Briefly discuss four disadvantages of using Cost-benefit analysis to measure utility.Ceja has utility function U=A2*B2 , where A equals the number of apples she eats each week, while B is the number of bananas she eats each week. Ceja has $20 to spend on fruit each week. The price of an apple is $1, while the price of a banana is $0.25. Find out the combination of Apples and Bananas that maximize Ceja’s satisfaction. If price of Banana is increased by $.25, what will be the new combination of A and B that would maximize her utility? Show graphically and drive the demand curve for BananasWhat is the difference between ordinal utility and cardinal utility? Explain why the assumption of cardinal utility is not needed in order to rank consumer choices!
- How does the utility-maximization model help highlight the income and substitution effects of a price change. Provide an example please.Evaluate the one specific law which states that the marginal utility of a good orservice declines as more of the good or service is consumed in a specific timeperiod.Discuss how the utility-maximization model helps highlight the income and substitution effects of a price change.