COURSE: MICROECONOMICS - CONSUMER THEORYPD: exercise resubmitted. Image attached A consumer B has a utility function of the form u(x1,x2)Vx1 + /2x2 where x1is the basic food basket and x, is utilities. In addition, he has an income of $ 980,000and the prices of food and utilities are $ 300,000 and $ 420,000 respectively. Basedon the above, answer:(a) Calculate the amount of food and utilities to be demanded by the consumer.b) Calculate the consumer's indirect utility function.c) Assume that the price of utilities is now $ 380,000; calculate the Hicksian demandsat this new price.d) The government does not want the price of utilities to decrease and prefers togive the consumer the monetary amount before the price change in c), so that hemaintains the same level of utility if the price had decreased. How much will thegovernment give?

Utility indicates the satisfaction consumers earn from consumption.

A consumer B has a utility function of the form u(x1,x2) = Vx1 + V2x, where x s the basic food basket and x, is utilities. In addition, he has an income of $ 980,00 and the prices of food and utilities are $ 300,000 and $ 420,000 respectively. Base on the above, answer: a) Calculate the amount of food and utilities to be demanded by the consumer. O) Calculate the consumer's indirect utility function. c) Assume that the price of utilities is now $ 380,000; calculate the Hicksian demand at this new price. d) The government does not want the price of utilities to decrease and prefers t give the consumer the monetary amount before the price change in c), so that h maintains the same level of utility if the price had decreased. How much will the JOvernment give?

A consumer B has a utility function of the form u(x1,x2) = Vx1 + V2x, where x s the basic food basket and x, is utilities. In addition, he has an income of $ 980,00 and the prices of food and utilities are $ 300,000 and $ 420,000 respectively. Base on the above, answer: a) Calculate the amount of food and utilities to be demanded by the consumer. O) Calculate the consumer's indirect utility function. c) Assume that the price of utilities is now $ 380,000; calculate the Hicksian demand at this new price. d) The government does not want the price of utilities to decrease and prefers t give the consumer the monetary amount before the price change in c), so that h maintains the same level of utility if the price had decreased. How much will the JOvernment give?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter4: Utility Maximization And Choice

Section: Chapter Questions

Problem 4.8P

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Question

COURSE: MICROECONOMICS - CONSUMER THEORY

PD: exercise resubmitted. Image attached

A consumer B has a utility function of the form u(x1,x2)
Vx1 + /2x2 where x1
is the basic food basket and x, is utilities. In addition, he has an income of $ 980,000
and the prices of food and utilities are $ 300,000 and $ 420,000 respectively. Based
on the above, answer:
(a) Calculate the amount of food and utilities to be demanded by the consumer.
b) Calculate the consumer's indirect utility function.
c) Assume that the price of utilities is now $ 380,000; calculate the Hicksian demands
at this new price.
d) The government does not want the price of utilities to decrease and prefers to
give the consumer the monetary amount before the price change in c), so that he
maintains the same level of utility if the price had decreased. How much will the
government give?

Study of decisions made by households and business firms at an individual level. It includes several laws and theorems related to demand, supply, production, allocation of resources, and prices.

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