State the implications of the weak axiom of revealed preference (WARP) for consumer choice. The following table indicates a consumer's observed choices for two goods, 21 and 12, under three sets of prices: period P1 P2 1 3. 3 2 3. 1 2 3 3. 4. 3 1 1 Do these choices satisfy WARP? Explain why or why not.

State the implications of the weak axiom of revealed preference (WARP) for consumer choice. The following table indicates a consumer's observed choices for two goods, 21 and 12, under three sets of prices: period P1 P2 1 3. 3 2 3. 1 2 3 3. 4. 3 1 1 Do these choices satisfy WARP? Explain why or why not.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Felix chooses between clothing, 9₁, and food, 92. His initial income is $4,000 a month, p₁ = 400, and p₂ = 40. At his initial bundle, he consumes q₁ = 2 and q₂ = 80. Later, his income rises to $4,800 and the price of clothing rises to p₁ = $600, but the price of food does not change (p2 = 40). As a result, he reduces his consumption of clothing to q₁ =1. Using a revealed preference reasoning (that is, knowing nothing about his indifference curves), can you determine how he ranks the two bundles? O A. Felix may prefer his initial bundle or he may be indifferent between them. B. Felix is indifferent between his initial bundle and his new bundle. O C. Felix prefers his new bundle. D. Felix prefers his initial bundle. O E. Insufficient information exists to determine which bundle Felix prefers.
1. What is the relationship between pS/pC and pC /pB? What feature of the utility function is responsible for these ratios?2. Now suppose that the moment before the above prices are elicited, the subject gets $10, which does not become part of her reference point. Again calculate the three prices pS, pB, and pC. What is the relationship between pS/pC and pC /pB? Why? 3. In some actual experiments, subjects were not given money, and pS/PC was found to be about 2, and PC/pB was found to be about 1. Write down a utility function that can produce these ratios.
Which of the following utility functions represents preferences over consumption bundles (X, Y) that violate the assumption of diminishing MRS? (a) U(X,Y) = 3 ln(X) + 5 ln(Y) (b) U(X,Y) = X² + y² (c) U(X, Y) = XY (d) U(X,Y) = X² + Y² (e) U(X, Y) = X¹Y³
Q12 please help quick Consider a utility function for apples and bananas. You are given the following three bundles: (12, 4), (4, 12), and (8, 8). Under the standard assumptions of the well-behaved preference relationship. you should strictly prefer (8, 8) to (12, 4) and (4, 12). Briefly explain why?
Your preferences are represented by the utility function U = (x9.5 + x2:5)², where the price of good 1 is 4 PHP and the price of good 2 is 3 PHP. Your income is given by 50 PHP. • Set up the Lagrangean function for this utility-maximization problem with constraint. Compute for the utility-maximizing quantities of x₁ and 22. • What is the maximum level of utility you can attain given your utility function and budget con- straint?
A consumer is observed making two choices. First, he faces prices p = (1,3) with wealth w = 8 but is limited to purchasing no more than 3 units of good 1. Given this budget set, he chooses the bundle x = (2, 2). Second, he faces prices p' = (2,1) and wealth w' = 8 with no limit on his purchases of either good. Given this budget set, he chooses the bundle 2' = (4,0). dentify all revealed preferences given these choices. Do this consumer's choices satisfy the Weak Axiom of Revealed Preference? - Could these choices result from the consumer choosing optimally given some mono- tone, convex, and continuous preferences? Explain your answer carefully; you do not have to provide a formal proof.
John’s preferences for apples (A) and berries (B) are represented by U(A,B)= A+2B . Apples cost £2 and berries £1. Given that John’s monthly income is £30 answer the following questions: What type of goods are apples and berries for John? What is the proportion to which John is willing to exchange apples for berries? Illustrate and solve graphically John’s utility maximization problem. If his income increases every month by £10, how will John’s consumption choice be affected? Illustrate graphically the income expansion path and the Engel curve for each good. How will an increase in the price of berries to £6 affect John’s optimal consumption choice? (John’s income is £30) Graph John’s demand curve for each good. Assume that John wins a voucher of £20, redeemable only in apples. How would this affect John’s utility? (Assume that prices and income are as described initially) Assume that John is presented with two options: an apple voucher of £20 or just £6 to spend on any good he wants.…
Suppose Katie buys the bundle (20,9) from the budget line 3x_1 + 5x_2 = 105. When the price of good 1 changes to p1 = 6 and the price of good 2 remains the same, she buys the bundle (5,15). On a later date when p1 = 5 and p2 = 4, by observing Katie’s choices we can say that the Weak Axiom of Revealed Preference (WARP) is violated if a) She buys the bundle (10,15). b) She buys the bundle (15,10) c) She buys the bundle (23,6) d) She buys the bundle (25,25). e) None of the above choices violates WARP.
3.