ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Sally loves to drink her coffee with two teaspoons of sugar. The unit
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- Amy consumes x and y and her preferences can be represented by the following utility function U(x,y) = 4x + y. 1. Are Amy's preferences transitive? 2. Does the marginal utility of x diminish, remain constant, or increase as the consumer buys more x? Explain. 6- 3. Can you use (2) to answer whether Amy's preferences are strictly monotonic? 4. What is MRS.y ? Is MRSx.y diminishing, constant, or increasing as the consumer substitutes x for y along an indifference curve? 5. On a graph with x on the horizontal axis and y on the vertical axis, draw a typical indifference curve. Also indicate on your graph whether the indifference curve will intersect either or both axes. Label the curve U1. 6. Are Amy's preferences convex? Are they strictly convex? Explainarrow_forwardAssume the prices of product X and Y are $1.50 and $1.00, respectively, and that Mr. Chen has $24 to spend. Assume a normal indifference curve. Assume that Mr. Chen needs 4 of product X to maximize utility. a. What is the slope of Mr. Chen's budget constraint. b. Write out Mr.Chen's equation to his budget constraint. c. What combination of X and Y will Mr. Chen purchase? d. Now assume that the price of Y changed from $1.00 to $2.00, redo part a, b and c,arrow_forwardTessa likes both ice-creams and pies. However, if she eats too much of them, she gets sick. That is, cating ice-creams or pics beyond a certain amount lowers Tessa's utility. Draw a set of indifference curve which might represent Tessa's preferences for ice-creams and pies.arrow_forward
- Charlie has the utility function U(xA, xB) = xAxB. His indifference curve passing through 35 apples and 18 bananas will also pass through the point where he consumes 5 apples and Select onearrow_forwardWhen plotted Sarah's indifference curve for coffee and tea reveals parallel indifference curves that always have a slope of -1. Suppose that Sarah's budget constraint is 20 -1.5C+1.0T where C is the quantity of coffee and T is tea. If Sarah wants to maximize utility, she will buy: a) equal amount of coffee and tea b) coffee only c) tea only d) more coffee than tea e) a combination of coffee and tea cannot be determined from the information givenarrow_forwardSuppose you have a $20 gift card and want to buy Blue and Red yarn. The utility function from yards of blue (B) and red (R) yarn can be expressed as follows: U(B,R) = 3B+R Red yarn costs $4 per yard. blue yarn costs $4 per yard. A) Graph the budget constraint and the indifference curves that can be reached. How many yards of each type of yarn will he purchase at these prices with his gift card?arrow_forward
- Mary has $100 to spend on goods X and Y. The price of Y is pY = $2.50. Mary has well-behaved preferences and two of her indifference curves are shown on the above graph along with some tangent points. don't need to use any utility functions or do any complicated math. 1.Suppose the price of X is $1.25. On the graph above, label Mary’s budget line as (BLA) and label Mary’s optimal consumption bundle as bundle A.2.Now suppose the price of X rises to $5. On the graph above, label Mary’s budget line as (BLB) and label Mary’s optimal consumption bundle as bundle B.3.On a separate graph, with X on the horizontal axis and PX (the price of good X) on the vertical axis, construct Mary’s demand curve for good X, carefully showing two points on Mary’s demand curve corresponding to the work you have done above.arrow_forwardA consumer has $100 to spend on craft beer and Schweinefleischaft (pork shanks). Suppose craft beercosts $10 per 4-pack if the customer purchases up to five 4-packs. After that, it is $5 per 4-pack. SupposeSchweinefleischaft is $5 per order of pork shanks.(a) Draw the budget constraint for this consumer, with craft beer on the horizontal axis and Schweine-fleischaft on the vertical axis.(b) Will the consumer ever purchase exactly five 4-packs of craft beer? Explain why, using both thegraph in part (a) and words.arrow_forwardAssume the prices of product X and Y are $1.50 and $1.00, respectively, and that Mr. Chen has $24 to spend. Assume a normal indifference curve. Assume that Mr. Chen needs 4 of product X to maximize utility. a. What is the slope of Mr. Chen's budget constraint. b. Write out Mr.Chen's equation to his budget constraint. c. What combination of X and Y will Mr. Chen purchase? d. Now assume that the price of Y changed from $1.00 to $2.00, redo part a, b and c,arrow_forward
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