Assume a piece of jewelry, and 3 consecutive drops in its price, from ??1 to ??2, from ??2 to ??3 and from ??3 to ??4. Alia’s preferences are such that her demand is relatively elastic between ??1 and ??2, relatively inelastic between ??2 and ??3, and that she perceives that piece of jewelry as a Giffen good between prices ??3 and ??4. How would her priceconsumption curve look like in an indifference curves framework with well-behaved preferences? Clearly label your graph.

Assume a piece of jewelry, and 3 consecutive drops in its price, from ??1 to ??2, from ??2 to ??3 and from ??3 to ??4. Alia’s preferences are such that her demand is relatively elastic between ??1 and ??2, relatively inelastic between ??2 and ??3, and that she perceives that piece of jewelry as a Giffen good between prices ??3 and ??4. How would her priceconsumption curve look like in an indifference curves framework with well-behaved preferences? Clearly label your graph.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter6: Demand Relationships Among Goods

Section: Chapter Questions

Problem 6.10P

See similar textbooks

Similar questions

2. Pam is rich and at this high income level, her demand for good X is independent of income and given by X*=37.2- 3 px/py where px and py denote respectively the price of good X and the price of good Y. Assuming the price of good Y is equal to 1, find Pam's compensating variation if the price of good X rises from 2 to 3.4 dollars.
Q.3. Suppose that Salim income is OMR 3000. His demand for good X and good Y depends upon the prices for these two goods, if the price of one unit of (good X) is OR 50 and the price of one unit of (good Y) is OR 60. If Ali income increase to 4200 will this affect Salim satisfaction level. Discuss a) Draw the budget line for Salim b) Find the slope of this budget line.
Assume a piece of jewelry and 2 consecutive drops in its price. Also consider Sara’s demand to be relative elastic in the price range from ?1 to ?2, and that she perceives jewelry as a Giffen good in the price range from ?2 to ?3. Draw her price-consumption curve with well-behaved preferences. Clearly label your graph.
1. Suppose David spends his income (I) on two goods, x and y, whose market prices are px and py, respectively. His preferences are represented by the utility function u(x, y) = lnx + 2lny (MUx = 1/x, MUy = 2/y). a. Derive his demand functions for x and y. Are they homogeneous in income and prices? b. Assuming I = $60 and px = $1, graph his demand curve for y. c. Repeat part (b) for the case in which px = $2
Julia has usual preferences over X and Y, and, at current prices and income, she spends 1/2 of her income on X. Her demands for both goods respond to changes in her income, but at current prices and income the income elasticity of her demand for Y is equal to exactly 1/3 times the value of her income elasticity of demand for X. And do you know what? If the price of Y were to go up by 1 percent, the quantity of X she demands would remain unchanged. a. If the price of X were to fall, would her demand for X increase, decrease or remain unchanged? More precisely, what is the own-price elasticity of her demand for X? b. If her income were to rise, would her demand for X rise, fall or remain unchanged? More precisely, what is the income elasticity of her demand for X?
Draw the following scenario: Assume a piece of jewelry and 2 consecutive drops in its price. Also consider Alia’s demand to be relative elastic in the price range from ? 1to ? 2, and that she perceives jewelry as a Giffen good in the price range from ? 2to ? 4. Draw her price-consumption curve with well-behaved preferences. Clearly label your graph. The graph may be something like this:
Which of the following statements are true? Instruction: you may choose more than one option. O. The Law of Demand is explained by the Slutsky-Hicks equationO. All statements are false.O. For well behaved preferences the income effect is positive.O. For well behaved preferences the substitution effect is non positive.O. if the demand foro good increases when income then the demand for that good must decrease when its price increases.O. A Giffen good cannot be explained by the Slutsky-Hicks equation.
1.(a) Derive own-price elasticity of demand (eii), income elasticity of demand (hi) and cross-price elasticity of demand (eij) for the Cobb-Douglas Utility Function. (b) With respect to Cobb Douglas preferences, what happens to the demand for each of two products (x and y) when the price of product y increases, as a result of: (i) the substitution effect; (ii) the income effect; and, (iii) the overall price effect?
If the utility function for a consumer is defined by U=6X^3/5Y^2/5 Given that the consumer's income is 300 currency units and unit price of goods X and Y are 12 and 15 currency units respectively, calculate the equilibrium quantity of both goods. Compute the price elasticity of demand for both goods and interpret your results. If income and prices of the two goods increase by 50%, calculate the equilibrium quantities of both goods
If the price of petrol increases from 70 cents to 77 cents per litre, and as a resultthe quantity demanded decreases from 1000 to 995 litres, calculate the priceelasticity of demand. 2. If the original price and quantity demand are $0.50 and 50 respectively, andthere is an increase in price to $0.55, and quantity demanded falls to 10,calculate the price elasticity of demand. 3. An individual has allocated income so as to maximise total utility and hasmarginal utility of coffee (per cup per week) that is four times that of tea (percup per week) but only a quarter of that of pepperoni pizza. If a pepperonipizza is $16, You are required to calculatea) Price of coffee per cup. b) Price of tea per cup.
33. Suppose MRSx,y = MUx/MUy = 0.1(a) If the consumer substitutes 10 units of X for one unit of Y, then the utility remainsunchanged(b) Regardless of prices, the consumer will only consume Y(c) If the consumer substitutes 1 unit of Y for 0.1 unit of X, then the utility remainsunchanged(d) Regardless of prices, the consumer will only consume X
A consumer’s weekly income is $5000, the price of a cell phone is $1250, and the price of a watch is $500. What quantity of cell phones and watches will maximize the consumer’s utility if they spend their entire weekly income on cell phones and watches? Explain your answer using marginal analysis. 1A. Suppose that this consumer’s income elasticity for watches is 5.4. what does this indicate about watches? If the cross-elasticity calculates to 0.8 what does this indicate about the relationship between watches and cell phones? 2 Determine and explain the Profit Maximization output of a perfectly competitive firm