An individual utility function is given by U(x,y) = x·y. This individual demand (optimal purchase) equation for x is a factor a of I/px: x* = a (I/px). In this specific case, factor a is equal to?
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An individual utility function is given by U(x,y) = x·y. This individual demand (optimal purchase) equation for x is a factor a of I/px: x* = a (I/px). In this specific case, factor a is equal to?
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- Evaluate the one specific law which states that the marginal utility of a good orservice declines as more of the good or service is consumed in a specific timeperiod.Jane receives utility from days spent traveling on vacation domestically (D) and days spent traveling on vacation in a foreign country (F), as given by the utility function U(D,F) = 10DF. In addition, the price of a day spent traveling domestically is $100, the price of a day spent traveling in a foreign country is $400, and Jane’s annual travel budget is $4000. Suppose F is on the horizontal axis and D is on the vertical axis. Jane's marginal rate of substitution between F and D is equal to 10 1 F/D D/FBased on several observations, people at older ages tend to buy more luxurious products than when they were younger. Does this mean that diminishing marginal utility of money declines as people age?
- Suppose that the indirect utility function takes the form(p, y) = f (p)y. What is the form of the expenditure function? What is the form of the indirect compensation function, p(p; q, y) in terms of the function f (.) and y?Consider the following infinite-horizon utility maximization problemProve that the utility maximization conditions as suggested by the “marginal utility framework” are consistent with the “indifference curves approach”.
- Marina decides to purchase a ring made from an alloy composed exclusively of gold (G) and titanium (T). The price of gold is $60 per gram, and the price of titanium is $30 per gram. Her total budget for the ring is $600. Her utility function is given by U(G,T) =GT. Suppose the price of titanium falls to $20 per gram. At the final basket, the optimal amount of titanium is()grams.Which of the following statements is true? Select one or more options: -If two different individuals have exactly the same budget constraint but different preferences (different appearance of the indifference curves) then they will have different equilibrium conditions for optimal choice -The marginal substitution ratio is always equal to 1 for perfect substitutes -If item X costs SEK 10, item Y costs SEK 20 and if the marginal benefit for X is 20 and the marginal benefit for Y is 30, then the individual should buy more of Y and less of X -In the case of a corner solution for an individual, the marginal substitution ratio for two goods is not equal to the relative price of the two goodsWhich of the following statements is true? Select one or more options: a-If two different individuals have exactly the same budget constraint but different preferences (different appearance of the indifference curves) then they will have different equilibrium conditions for optimal choice b-The marginal substitution ratio is always equal to 1 for perfect substitutes c-If item X costs SEK 10, item Y costs SEK 20 and if the marginal benefit for X is 20 and the marginal benefit for Y is 30, then the individual should buy more of Y and less of X d-In the case of a corner solution for an individual, the marginal substitution ratio for two goods is not equal to the relative price of the two goods
- Which among the following is true? Select one: a. None of the answers are correct b. Marginal utility of cash gift is same as of the noncash gift c. Cash gifts add relatively more to total utility of recipient than noncash gifts d. Both cash and noncash gifts add same to the total utility of recipient e. Noncash gifts add relatively more to total utility of recipient than non cash giftsConsider a utility function l(X_{A}, X_{B}) = X_{A}*X_{B} Let P_{A} =\$3 and P_{B} =\$2. and income is set at M =\$40. Suppose P_{B} falls to P_{B}' = 1 1. Before the price change, what was x_{A} ^ * and x B^ * the optimal consumption bundles? Sketch the original budget line and label the point ( x_{A} ^ * ,x B ^ * ) as A. Let x_{A} be on the horizontal axis. 2. If, after the price change, income changed so that the original optimal bundle is just as affordable. What is the new income, m' ? At (p_{A}, p_{B}', m') what is the new optimal bundle (x_{A}', x_{B}')' Sketch the budget line associated with p_{A}, p_{B}', m' ) . Label the point (x_{A}', x_{B}') as B. 3. Does the substitution effect result in more x_{B} ? How many more or fewer? 4. After the price change, how much x_{A} and x_{B} are actually bought. ( x_{A} ^ prime prime ,x B ^ prime prime )? Sketch the budget line associated with (p_{A}, p_{B}', m) Label the point x_{4} ^ prime prime , x_{R} ^ prime prime ) as C. 5.…A consumer is currently purchasing three pairs of jeans and five T-shirts per year. The price of jeans is $60, and shirts cost $10. At the current rate of consumption, the marginal utility of jeans is 240, and the marginal utility of shirts is 30. Based on the model of consumer choice, what should this consumer do to maximize utility? Purchase fewer shirts and more jeans. Purchase more shirts and fewer jeans. Purchase only jeans. This consumer is already maximizing utility. Purchase only shirts.