EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
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Chapter 14, Problem 3RQ
To determine
To explain:
Reason for choosing C0 over C1
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QUESTION 1
For the utility function U = Qx0.50Qy(1-0.50) and the budget 122 = 8Qx + 14Qy find the CHANGE in optimal consumption of Y if the price of Xincreases by a factor of
1.7.
Please enter your response as a positive number with 1 decimal and 5/4 rounding (e.g. 1.15 1.2, 1.14 = 1.1).
of 55
The vending machine in Katherine's office building offers cans of pop and candies.
Katherine's utility function is U = 3PC, where P is the amount of pop consumed per
week and C is the amount of candy consumed per week. Pop costs $1 and candy
costs $0.5 per bag. If Katherine has $10 to spend, she will consume
An individual’s utility function is given by where is the amount of leisure measured in hours per week and is income earned measured in cedis per week.
Determine the value of the marginal utilities, when = 138 and = 500. Hence estimate the change in utility if the individual works for an extra hour, which increases earned income by GH¢15 per week. Does the law of diminishing utility hold for this function?
Chapter 14 Solutions
EBK INTERMEDIATE MICROECONOMICS AND ITS
Ch. 14.3 - Prob. 1MQCh. 14.3 - Prob. 2MQCh. 14.4 - Prob. 1MQCh. 14.4 - Prob. 1TTACh. 14.4 - Prob. 2TTACh. 14.5 - Prob. 1TTACh. 14.5 - Prob. 2TTACh. 14.5 - Prob. 1MQCh. 14.6 - Prob. 1TTACh. 14.6 - Prob. 2TTA
Ch. 14.6 - Prob. 1MQCh. 14.6 - Prob. 2MQCh. 14.6 - Prob. 1.1TTACh. 14.6 - Prob. 2.1TTACh. 14 - Prob. 1RQCh. 14 - Prob. 2RQCh. 14 - Prob. 3RQCh. 14 - Prob. 4RQCh. 14 - Prob. 5RQCh. 14 - Prob. 6RQCh. 14 - Prob. 7RQCh. 14 - Prob. 8RQCh. 14 - Prob. 9RQCh. 14 - Prob. 10RQCh. 14 - Prob. 14.1PCh. 14 - Prob. 14.2PCh. 14 - Prob. 14.3PCh. 14 - Prob. 14.4PCh. 14 - Prob. 14.5PCh. 14 - Prob. 14.6PCh. 14 - Prob. 14.7PCh. 14 - Prob. 14.8PCh. 14 - Prob. 14.9PCh. 14 - Prob. 14.10P
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- Answer the following questions using the following information. Columns 1 and 2 in the table below show the marginal utility that Cody gets by purchasing products A and B. Column 3 shows the marginal utility Cody gets from saving Assume that the price of A is $13 the price of B is $10, and Cody has an income of $129. a) Find the following series of MU/$ for each column. Note: Keep as much precision as possible during your calculations. Your final answer should be accurate to at least two decimal places Column 1 Column 2 Column 3 Units of A MU MU/S Units of B MU MU/$ Number of $ saved MU MU/S 68 6.8 1 80 6.15 1. 13 0. 2 71 5.46 2 63 6.3 2 10 0. 3 66 5.08 3 56 5.6 3 7 4 61 4.69 4. 46 46 0. 54 4.15 40 4 45 3.46 31 3.1 6. 1 39 3 22 2.2 0. 29 2.23 8 17 1.7 8 b) What quantities of A and B will Cody purchase in maximizing his utility? Quantity of A: 0 Quantity of B: 0 c) How many dollars will Cody save? Dollars Saved = $0 SAVE AND CLOSEarrow_forwardSuppose a household has the following lifetime utility function: U=c1/2 + ẞc¹/2 12tt+1 A) Find expressions for the partial derivatives of lifetime utility, U, with respect to period t and period t + 1 consumption. Is marginal utility of consumption in both periods always positive? B) Find expressions for the second derivatives of lifetime utility with respect to period t and t+1 consumption, i.e., 2U and a 20_Are these second derivatives always negative for ac²²+1 any positive values of period t and t+1 consumption? C) Derive an expression for the indifference curve associated with lifetime utility level Uo (i.e., derive an expression for C++₁ as a function of U₁ and c). What is the slope of the indifference curve? How does the magnitude of the slope vary with the value of c?arrow_forwardEXERCISE 7 Aisha is considering how to allocate the next 6 hours of her free time. She could choose between leisure (L) and helping her neighbour with the house chores. If she decides to help her neighbour, she is going to get paid at £25 per hour, which she can then spend on her favourite pizza (P). Suppose the price of pizza is £12.50. Aisha's preferences for leisure and pizza are given by the following utility function: U(L, P) = 3L + P. (MU₁ = 3, MUp = 1). a) Write down Aisha's budget equation and draw the corresponding budget line. Clearly label the axes and calculate the coordinates of the points of intersection of the budget line with each axis. b) Calculate Aisha's marginal rate of substitution between leisure and pizza. Explain the concept of MRS and interpret the figure obtained. c) Find Aisha's optimal consumption bundle, both algebraically and graphically. Explain your reasoning. d) Would Aisha's optimal choice change if she could get a discount on her pizza purchases so…arrow_forward
- 7. An individual's utility function is given by U =1000x, +450x, +5 x,x, -2x - x where x, is the amount of leisure measured in hours per week and x, is income earned measured in cedis per week. Determine the value of the marginal utilities, when x, = 138 and x, = 500. Hence estimate the change in utility if the individual works for an extra hour, which increases earned income by GH¢15 per week. Does the law of diminishing utility hold for this function?arrow_forwardQuestion 2 David spends his budget on chocolate and chip. His utility function is given by ?(?1,?2)= 2?1?2, where ?1 is the number of chocolates he consumers per week, and ?2 is the number of chips he buys per week. A chocolate costs 10 SEK, and a chip costs 20 SEK. David’s weekly budge for consuming on these two goods is 120 SEK. (1) What is David’s budge line? Draw the budget line on a graph with chocolate amounts on the horizontal axis and chip amounts on the vertical axis. Write explicitly at which points budget line crosses the axis. (2) What is David’s marginal utilities for the two goods, respectively? What is his marginal rate of substitution between the two goods? (3) What is David’s optimal choice? Calculate the numerical answer for the optimal bundle. Also draw an indifference curve for David on the same graph as question(1) and show the optimal bundle.arrow_forwardAdrienne consumes three goods, x, y, and z. Her consumption preference is given by the utility function: u(x, y, z) = x*y} z#, (Pz-Py, Pz) where x, y, and z are the quantities she consumes (respectively). Let p = be the prices of the goods. Answer the following questions, and justify your answers carefully and mathematically. (a) Last year p = sumption bundle last year. (1, 10, 10) and Adrienne's income was 35. Find her optimal con- (b) This year, the prices of x and z have both risen 3.5% while the price of y has risen 7%, and Adrienne got an income raise of 3%. Find the (approximate) percentage changes of her consumption in the three goods due to these changes in prices and income. Does her raise adequately compensate her for the changed prices? What additional percentage change of her income would be needed if we were to restore Adrienne to last year's exact utility level?arrow_forward
- Jien is just bored all the time; no amount of success makes him happy, it seems. Below is a list of his income for the last several years and the utility he experienced per dollar of income: Year Yearly Income Utility per Dollar Earned 2017 $60,000 2 utils 2018 $70,000 1.8 2019 $100,000 1.5 2020 $120,000 1 2021 $145,000 0.40 From the above, we can say that Jien most likely is different from most people economists study in terms of risk attitudes is "risk loving" will not take a fair bet has a utility of wealth curve that is a straight linearrow_forwardQ.7 A consumer's utility function is given by the expression: U = (0.6Xx5 + 0.4Y5). • Determine the marginal utility functions for each commodity. Does marginal utility decrease when consumption increases? Assuming that the price of good X is Rs 15 and the price of Y is Rs 6, write the equation of the budget line and plot it when income is Rs 450. What is its slope? What does it indicate? Calculate the marginal rate of substitution of Y for X and interpret its economic meaning. Write the equation showing consumer's equilibrium condition. Obtain the equilibrium values of X and Y. Find the expressions for change in MUx due to increase in Y and change in MUy due to increase in X.arrow_forwardJerry's utility function is U(x,y) = ( 5x + y ) 18. Find Jerry's MRS (for good X in terms of good Y) and then find the value of the derivative dMRS/dx at the point were x=39 and y=69 and enter it below. Remember to enter the number in decimal form. If the number is negative, then use the negative sign (e.g., -3.29839).arrow_forward
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