ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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- Exercise 2 Suppose you have the following hypothetical demand or sales function. Qx= -4Px+2Py+0.201+0.04A and PX = $200, (price of good X) PY =$230, (price of good Y) 1 = $1,500 (disposable per capita income) A=$12,000 (advertizing expenditures) a. Write out a reduced demand function b. Solve for and write out the demand curve equation c. Give a narrative interpretation for the coefficient of I d. How could we classify good X and good Y? Explain why.arrow_forwardA grocery store is considering putting broccoli on sale, temporarily reducing the price 501 %. Let Y₁¡ denote the amount of broccoli household i would purchase if broccoli is on sale when they visit the grocery. And let Yoi denote the amount of broccoli household i would purchase if broccoli is not on sale when they visit the grocery. Which of the following represents the causal effect of putting broccoli on sale on the amount of broccoli household i purchases? O Y₁i-Yoi 10 Y + Y li 2 O Y₁i O O Oiarrow_forwardAriya likes to play golf. The number of times per year that she plays depends on both the price of playing a round of golf as well as Ariya's income and the cost of other types of entertainment-in particular, how much it costs to go see a movie instead of playing golf. The three demand schedules in the table below show how many rounds of golf per year Ariya will demand at each price under three different scenarios. In scenario D1, Ariya's income is $80,0o00 per year and movies cost $15 each. In scenario D2, Ariya's income is also $80,000 per year, but the price of seeing a movie rises to $17. And in scenario D3, Ariya's income goes up to $100,000 per year, while movies cost $17. Scenario D1 D2 D3 Income per year $80,000 $80.000 $100,000 Price of movie ticket $15 $17 $17 Price of Golf Quantity Demanded $55 15 10 15 $40 25 15 30 $25 40 20 50 Instructions: Round your answers to two decimal places. If you are entering any negative numbers be sure to include a negative sign (-) in front of…arrow_forward
- 3. Consider the following utility function, a (1.2) = min , br), 00 (a) in details.) Does the Marshallian demand increase with price? Are the two consumption goods normal goods? Derive the Marshadian demand functions. (Explain your derivationarrow_forwardSuppose that the least amount of goods and services that Jim will consume in a year is $40,000. Jim tends to save $0.30 of every dollar of disposable income that he makes. Use the given line to graph Jim's consumption function for disposable income levels between $0 and $200,000. Move each endpoint to the appropriate spot on the graph.arrow_forwardNote: Dashed drop lines will automatically extend to both axes. OFFEE (Millions of pounds) 32 28 COFFEE (Millions of pounds). 24 20 16 0 32 28 24 20 16 0 PPF 4 12 PPF 0 The following graph shows the same PPF for Sylvania as before, as well as its initial consumption at point A. As you did for Candonia, place a black point (plus symbol) on the following graph to indicate Sylvania's consumption after trade. (?) 4 O True 8 O False Candonia 4 12 20 16 GRAIN (Millions of pounds) 24 Sylvania 12 20 16 GRAIN (Millions of pounds) 28 24 32 28 Consumption After Trade 32 (? + Consumption After Trade True or False: Without engaging in international trade, Candonia and Sylvania would have been able to consume at the after-trade consumption bundles. (Hint: Base this question on the answers you previously entered on this page.)arrow_forward
- Derive and plot Madeline's demand curve for Coke if she views Coke and Pepsi as perfect substitutes. (Hint: The quantity of Coke consumed where the budget line hits the Coke axis is Y/Pc, where pc is the price of Coke, pp is the price of Pepsi, and Y is income.) Use the 3-point curved line drawing tool to draw Madeline's demand curve for Coke. To simplify the analysis, assume that if the price of Coke and the price of Pepsi are equal, then Madeline, though indifferent between the two, only consumes Coke. Label this curve 'Demand'. Carefully follow the instructions above, and only draw the required objects. C Price/can of Coke Pp Y Pc Coke, Cans per yeararrow_forwardBob enjoys drinking Californian and French wines and regards these two goods as perfect substitutes. Bob likes ordering wine from local wineries in California or France, so he pays in $US for Californian wines and in Euro for French wines. Suppose that a bottle of Californian wine costs $30 on average, and a bottle of French wine costs €25 on average. Since Bob is indifferent between Californian and French wines, he treats $US and Euro as perfect substitutes as well. Assume that Bob’s utility is increasing in the amount of money he can spend on purchasing wines. Let x denote the amount of $ US that Bob spends on Californian wines, and let y denote the amount of Euro that Bob spends on French wines every quarter. (a) Write down Bob’s utility function in terms of quantities of $US and Euro: (b) Let p denote exchange rate for Euro . Let I be the income (in $USA) that Bob spends quarterly on wines. Write down Bob’s utility maximization problem and find Marshallian demand functions for…arrow_forwardThe graph below shows David’s preferences for leisure and consumption. Draw three budget constraints in the graph below. One if David’s wage is $10 per hour (BC1), another if his wage is $20 per hour (BC2) and a third for if his wage is $30 per hour (BC3). Show the optimal combination of leisure and consumption for each of the three budget constraints. Label the optimal amount of Leisure, L1, L2 & L3, and label the optimal amounts of consumption C1, C2 & C3.arrow_forward
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