Microeconomics
2nd Edition
ISBN: 9780073375854
Author: B. Douglas Bernheim, Michael Whinston
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 5, Problem 4CP
To determine
Explain Ely’s marginal rate of substitution for MRSSB, values of PB is his best choice as an inferior solution, and the price of the boundary choice.
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Students have asked these similar questions
A consumer consumes two agricultural products: Red Meat, and Tomatoes according to the following utility function:
U = RT
That is, the total utility is the multiplication of the quantity consumed of the two products. Given that consumer's income is 210, price of R is 10, and the price of Tis 2,
a)Write down the budget constraint (budget line equation) for this consumer.
b)Determine the quantities that the consumer should consume of each of the two products
c)Calculate the value of the lagrangian multiplier and derive the demand function for Red Meat and for tomatoes.
You consume music (M) and concert tickets (C). Your utility function is U(M, C) = M1/4C3/4. The marginal utility for concert tickets, MUC is MUC =3/4C-1/2M1/4 and the marginal utility for music, MUM is MUm = 1/4C3/4M-3/4
(a) Calculate MRSMC using only the given marginal utilities. (b) Solve for the utility of bundle A where M = 16 and C = 16. Solve for your utility at bundle B where M = 128 and C = 8. Are the utilities the same? (c) Calculate MRSMC at bundle A and at bundle B. Are they the same? (d) Are your indifference curves convex? Draw the ICs. Make sure to label the quantities of the consumption bundles, the axis, and the MRS at those bundles.
Utility maximization with a budget constraint. A hypothetical consumer spends all tgheir income on ramen noodles (N) and wild rice (W). N is the quantity of noodles; W is the quantity of wild rice. Their income is $1,600 per month. the price of noodles is $2 per package and the price of wild rice is $20 per pound. The utility function is U=sqrt(N*W).
the MRS = -N/W.
The budget constraint is: 1,600 = 2*N + 20*W
Graph Qty of noodles (N) on vertical axis and Qty of wild rice (W) on horizontal axis.
SOLVE:
a. Graph the budget constraint. label all points. What is the slope of the budget constraint?
b. Find the optimal quantities of noodles(# of packages) and the wild rice (# of pounds) given the budget constraint. graph these optimal quantities. draw your indifference curve on the same graph.
c. Show on your graph what happens when the price of wild rice increases to $40 per pound. Find your new optimal quantities of noodles and wild rice. label all points on graph. label the…
Chapter 5 Solutions
Microeconomics
Ch. 5 - Prob. 1DQCh. 5 - Prob. 2DQCh. 5 - Prob. 3DQCh. 5 - Prob. 4DQCh. 5 - Prob. 1PCh. 5 - Prob. 2PCh. 5 - Prob. 3PCh. 5 - Prob. 4PCh. 5 - Prob. 5PCh. 5 - Prob. 6P
Ch. 5 - Prob. 7PCh. 5 - Prob. 8PCh. 5 - Prob. 9PCh. 5 - Prob. 10PCh. 5 - Prob. 11PCh. 5 - Prob. 12PCh. 5 - Prob. 13PCh. 5 - Prob. 14PCh. 5 - Prob. 15PCh. 5 - Prob. 16PCh. 5 - Prob. 1CPCh. 5 - Prob. 2CPCh. 5 - Prob. 3CPCh. 5 - Prob. 4CPCh. 5 - Prob. 5CPCh. 5 - Prob. 6CPCh. 5 - Prob. 7CPCh. 5 - Prob. 8CP
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