c. Describe and explain Walras Law d. Describe and explain the transitive assumption e. Describe and explain the difference between income effect and substitution effect
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Please answer all the questions(c,d,e) clearly. This is my last chance. Big Thanks!!
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- 1. Second Fundamental Theorem of Welfare Economicsa. Describe the theorem, making sure that you define clearly the terms used in thedescription (e.g. if you use the term “efficient” you have to describe what this means).b. Explain why the theorem implies that there is no intrinsic trade-off between efficiencyand interpersonal equity. c. Demonstrate your argument using an Edgeworth box, making sure that you describe allthe elements of the box appropriately.Consider a representative agent with the utility function U = ln(Ct)+ Nt The budget constraint is Ct = wtNt +Dt where wt is the wage and Dt is non-wage income (i.e. a dividend from ownership in the firm). The agent lives for only one period (period t), and hence its problem is static. (a) Derive an optimality condition characterizing optimal household behav- ior. (b) Solve for the optimal quantities of consumption and labor. Plz do fast asap, urgent.Eren’s two main hobbies are taking vacations overseas (V) and eating expensive meals (M). His utility function is given as: U(V,M) = V^2MLast year, the average price of taking a vacation overseas was US$200 and the average price of an expensive meal is $50. However, due to supply problems in Onions, the average price of an expensive meal rose to $75. The average price of a vacation did not change. His income, which is $1500, did not change. Suppose that the Department of Welfare wants to know how much should be given to Eren to offset his change un utility due to the price increase of an expensive meal. Calculate the compensative variation (CV).
- Draw the indifference curve for someone decidinghow to allocate time between work and leisure.Suppose the wage increases. Is it possible that theperson’s consumption would fall? Is this plausible?Discuss. (Hint: Think about income and substitutioneffects.)Second Fundamental Theorem of Welfare Economics a. Describe the theorem, making sure that you define clearly the terms used in the description (e.g. if you use the term “efficient” you have to describe what this means). b. Explain why the theorem implies that there is no intrinsic trade-off between efficiency and interpersonal equity. c. Demonstrate your argument using an Edgeworth box, making sure that you describe all the elements of the box appropriately.Q2) B. Allocating Income to Maximize utility is essential in microeconomic theory, based on the following figures, where P of A = 3 OMR and P of B = 6 OMR Q TU of A TU of B MU of A MU of B MUA/P MUB/P 1 12 21 2 22 33 3 28 42 4 32 48 5 34 51 6 34 51 The Required: Fill the table above Explain when the Utility maximization holds
- Labor-Leisure choice. Uses 80 hour maximum work week. Utility = R3C2 R = leisure C = dollar amount of income for consumption Budget Line 1: Wage = $16 per hour. No other income. Draw the Labor-Leisure diagram, including the budget line. Solve the point of optimization, and label it point A. Draw the indifference curve. Label it U1 Budget Line 2: Wage = $22 per hour. No other income. Draw the budget line for this new $22 wage. Solve the point of optimization, and label it point B. Draw the indifference curve. Label it U3 Use an auxiliary budget line to separate the income effect from the substitution effect. Identify the substitution effect as point S. Draw the indifference curve. Label it U2 The point of optimization for part C can be labeled, rather than numerically solved, as long as the drawn answers show expected results for two normal goods.(i) Keith’s marginal utility of leisure is C – 20 and his marginal utility of consumption is L – 50. There are 110 hours in the week available to split between work and leisure. Keith receives £250 of welfare payments each week regardless of how much he works (assume he spends all of his welfare payments on consumption). What is Keith’s reservation wage? (ii) Suppose Danny receives the same welfare payments each week as Keith and has the same number of available hours (110). However, Danny’s indifference curve is flatter than Keith’s. How would his reservation wage compare to Keith’s? Why?Consumer's Utility: U=2Y2-16Y What is the utility maximizing level of income?
- Q5 plz help quick The marginal rate of substitution of nickels for dimes is O negative and constant. O negative but varies from point to point on a given indifference curve. O zero. positive but decreases as the number of Nicole's increasesEren’s two main hobbies are taking vacations overseas (V) and eating expensivemeals (M). His utility function is given as: U(V,M) = V2MLast year, the average price of taking a vacation overseas was US$200 and the averageprice of an expensive meal is $50. However, due to supply problems in Onions, theaverage price of an expensive meal rose to $75. The average price of a vacation did notchange. His income, which is $1500, did not change. Suppose that the Department of Welfare wants to know how much should begiven to Eren to offset his change un utility due to the price increase of an expensivemeal. Calculate the compensative variation (CV).This question will analyze the impact on a person's labour supply from a shock to their partner's job. Assume leisure is a normal good. Let's assume Vanessa has a wage rate of $20 per hour. Recently her partner, Bill, had to take a wage cut at work, with his wage falling from $45 per hour to $30 per hour, but allowed them to continue working 40 hours per week. Analyze the decision of the household over choice consumption and Vanessa's leisure, taking Bill's hours as given (constant).
