For each of the following statements, define all of the underlined terms. Then, explain why the statement is true or false. a. If a consumer views two goods as perfect substitutes, then their optimal choice will be a corner solution if MRS ≠ MRT. b. The substitution effect from a price increase states that the consumer will always choose a smaller amount of that good to consume. However, the income effect states that consumption can move in either direction. c. Suppose Alf and Bo have convex indifference curves. Alf likes units of "X" more than units of "Y" but Bo likes units of "Y" much more than units of "X." Then, in the optimum, Alf's marginal rate of substitution will be different from Bo's even if they face the same prices. d. Economists assume that preferences are ordinal. This implies that given two utility functions and one is a monotonic transformation of the other, then they represent the same preferences over bundles of goods.

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Consider the market for Netflix Subscriptions. Show graphically and explain using economic intuition, what happens to the market price and quantity in each of the following 3. Bruno can spend his income on two different goods: smoothies and energy bars. For each of the following three situations, decide if the given consumption bundle is within Bruno’s consumption possibilities. Then decide if it lies on the budget line or not. a) Smoothies cost $2 each, and energy bars cost $3 each. Bruno has income of $60. He is considering a consumption bundle containing 15 smoothies and 10 energy bars.b) Smoothies cost $2 each, and energy bars cost $5 each. Bruno has income of $110. He is considering a consumption bundle containing 20 smoothies and 10 energy bars. c) Smoothies cost $3 each, and energy bars cost $10 each. Bruno has income of $50. He is considering a consumption bundle containing 10 smoothies and 3 energy bars. 4. In each of the following situations, describe the substitution…

On the graph below, the consumer begins at L1. The relative prices change to L2. Complete the table and the sentence below. (Hint: The dashed line is a reference line to show us the income effect. Point B shows only the income effect. The change from A to B is the income effect. The change from B to C is the substitution effect.) Porcupines consumed at 'A'   Grenades consumed at 'A'   Porcupines consumed at 'C'   Grenades consumed at 'C'   Will consumption of Grenades increase or decrease due to the income effect?   Quantity change in Grenades due to income effect    Will consumption of Grenades increase or decrease due to the substitution effect?   Quantity change in Grenades due to substitution effect   Will consumption of Porcupines increase or decrease due to the income effect?   Quantity change in Porcupines due to income effect   Will consumption of Porcupines increase or decrease due to the substitution effect?   Quantity change in Porcupines due to…

1) Elaine wants to keep a good balance of soup and Jujyfruit (a delicious fruit flavored candy) in her diet. Her preferences over bundles of soup and Jujyfruit are represented by the quasi-linear utility function U(S,J) = J0.5 + S, where S and J denote the quantities of soup and Jujyfruit, respectively (Assume fractional quantities of each good can be consumed). Let Ps & Pj denote the prices of the goods and Y denote Elaine's monthly income for spending on these goods. For this exercise, treat soup as the x-axis good. a) Find Elaine's Marshallian demand for soup and Jujyfruit. Is soup a normal or an inferior good? Justify your answer using calculus. Also, calculate the derivative of Marshallian demand for Jujyfruit with respect to income and briefly explain what this implies about the relationship between the demand for Jujyfruit and income for Elaine. b) Now, assume Pj = $5 and Ps Marshallian demanded quantities of Jujyfruit and soup given these prices and income. Use your answers…

Hello, can you double-check these answers, please? I already got the answers to these questions but I wanted to make sure they are correct?  3) When the price of a good falls and customers tend to buy more of it instead of other goods, economists call this the ________ effect.      A) substitution B) diminishing marginal utility C) income      D) ceteris paribus Correct: D   11) Suppose that it is observed that the price of a commodity rises and that the quantity sold falls. From this we can deduce      A) that the demand curve has shifted to the left, but we cannot deduce whether or not the supply curve has shifted. B) that the demand curve has shifted to the right, but we cannot deduce whether or not the supply curve has shifted. C) that the supply curve has shifted to the right, but we cannot deduce whether or not the demand curve has shifted. D) that the supply curve has shifted to the left, but we cannot deduce whether or not the demand curve has shifted  Correct: A   35) When a…

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On the graph below, the consumer begins at L1. The relative prices change to L2. Complete the table and the sentence below. (Hint: The dashed line is a reference line to show us the income effect. Point B shows only the income effect. The change from A to B is the income effect. The change from B to C is the substitution effect.) Porcupines consumed at ‘A’   Grenades consumed at ‘A’   Porcupines consumed at ‘C’   Grenades consumed at ‘C’   Will consumption of Grenades increase or decrease due to the income effect?   Quantity change in Grenades due to income effect   Will consumption of Grenades increase or decrease due to the substitution effect?   Quantity change in Grenades due to substitution effect   Will consumption of Porcupines increase or decrease due to the income effect?   Quantity change in Porcupines due to income effect   Will consumption of Porcupines increase or decrease due to the substitution effect?…

Suppose you are given the following information for a particular individualconsuming two goods, a and b: Pa = $5, Pb = $6, MUa = 100, MUb = 200, and income (m) = $200.a) Sketch the budget set. What is the slope of the Budget Line? What are maximal possibleconsumptions of a and b?b) What is the MRSab for the two goods?c) Is this person maximizing her utility? How can you tell?d) Should she consume more of good a or of b? Explain.e) Why can’t you tell what her optimal bundle is? Explain.

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