Roy has preferences for laptops (L), and drones (D). Laptops costs $750 a unit and drones costs $2000 a unit. Roy has $15000 to spend on both goods. Give the equation for Roy’s budget line. If drones are on the vertical axis, what is the slope of the budget line? Roy is a utility maximizer. Describe the utility maximization condition. Using the available information at what value is utility expected to be maximized. “Drones are Roy’s favorite electronic therefore the law of diminishing marginal does not apply”. Do you agree with this statement? It is known that the indifference curve is convex. What does this tell you about the relationship between the goods?

Assume that the price of oranges is $2 and the price of starfruit is $1.  You have $10 of income to spend on both goods, and you intend to spend the entire amount.  Note that MU stands for marginal utility. Q of oranges       MU from oranges       Q of starfruit       MU of starfruit          1                           $20                             1                         $12          2                             16                             2                           10          3                             12                             3                             8          4                              8                              4                             6          5                              4                              5                             4          6                              0                              6                             2 To maximize total utility, you would consume _____ oranges and _____ starfruit.   Question 25…

2.5 Ms. Caffeine enjoys coffee (C) and tea (T) accord- ing to the function U(C,T) = 3C+4T. a. What does her utility function say about her MRS of coffee for tea? What do her indiffer- ence curves look like? b. If coffee and tea cost $3 each and Ms. Caffeine has $12 to spend on these products, how much coffee and tea should she buy to maximize her utility? c. Draw the graph of her indifference curve map and her budget constraint, and show that the utility-maximizing point occurs only on the T-axis where no coffee is bought. d. Would this person buy any coffee if she had more money to spend? e. How would her consumption change if the price of coffee fell to $2?

Q1. Jason has preferences defined over novels (good x) and DVDs (good y) described by the utility function U(x,y)= x2y2. He has income of $120; novels cost $5 each, while DVDs are priced at $15 each. a) Calculate Jason's optimal consumption bundle, AND his maximized utility level Suppose the price of novels increases to $7.5, while the price of DVDs and income are unchanged. b) In the same diagram, draw his old and new budget constraint; AND calculate his nep optimal bundle. c) Calculate the Total Effect (TE), Substitution Effect (SE) and Income Effect (E) of novels associated with the price increase of novels; AND SHOW them in your initial diagram. (Hint: keep 2 decimals if need)

Mike is a jellyfish wrangler.  In June and July he spent his budget on fish tanks and wet suits. Each fish tank cost $50 and each wet suit cost $100. At Mike's optimal choice, his marginal utility from the last fish tank purchased is 200. This means that his marginal utility from the last wet suit purchased is:

U(x, y) = xayb A consumer maximises utility subject to a budget constraint M = Pxx+Pyy Where px is the price of good x, py is the price of good y and M is the budget available. a. Derive an expression for the marginal utility of x. Under what condition is the marginal utility diminishing. b. Derive an expression for the marginal utility of y. Under what condition is the marginal utility diminishing.

Mr. Rational has $27 that he plans to spend purchasing 5 units of good X (priced at $3 per unit) and 6 units of good Y (priced at $2 per unit). The marginal utility of the fifth unit of X is 30, and the marginal utility of the sixth unit of Y is 18. If Mr. Rational is a utility maximizer, he should: buy less of X and more of Y. buy X and Y in the quantities indicated. buy more of X and less of Y. not buy anything. buy less of X and even lesser than that of Y.

QUESTION 4 Linguini and Colette consume only éclair (x,) and profiterole (x2). Linguini has utility function UA = x4x4 and Colette has utility function UB = 2xfx. Linguini is endowed with 10 éclair (x,) and 3 profiterole (x), while Colette is endowed with 20 éclair (x,) and 9 profiterole (x2). (a) Draw an Edgeworth box with x, on the horizontal axis and x, on the vertical axis. Position Linguini on the bottom left corner and Colette on the top right comer. Indicate the total number of units of x, and x2. Label the endowment allocation. (b) Derive the equation of the contract curve, ie., find x(x). In your graph in (a), draw the contract curve.

Suppose Al is currently consuming five movies and two concerts per month. If his utility function is given by U = 15MC, where Mrepresents the number of movies seen and C represents the number of concerts attended, Al's total utility is equal to: 75 15 150 10 30

Gabriella obtains utility from consuming granola bars and cappuccino. The following table shows the total utility (TU) she obtains from consuming different amounts of the two goods. The price of a granola bar is $3 and the price of a cup of cappuccino is $2. She has allocated $9 to spend on granola bars and cappuccino. 1. Complete the table by calculating the marginal utility (MU) and the MU per dollar spent on each granola bar and cup of cappuccino. 2. What is Gabriella’s optimal consumption bundle of granola bars and cups of cappuccino?