Choose one of the answers from the five choices provided. And please, also provide a brief description, explanation or argument for your choice. Thank you Bartleby! 3. Assuming that consumption and leisure are normal goods, working hours will decrease when wages increase if: (A). The income effect dominates the substitution effect. (B). The substitution effect dominates the income effect. (C). If the income and substitution effects move in the same direction (for example, if both have the same sign). (D). If the income effect and the substitution effect move in opposite directions (for example, if they have different signs). (E). The increase in wages is accompanied by an increase in prices.

Choose one of the answers from the five choices provided. And please, also provide a brief description, explanation or argument for your choice. Thank you Bartleby! 3. Assuming that consumption and leisure are normal goods, working hours will decrease when wages increase if: (A). The income effect dominates the substitution effect. (B). The substitution effect dominates the income effect. (C). If the income and substitution effects move in the same direction (for example, if both have the same sign). (D). If the income effect and the substitution effect move in opposite directions (for example, if they have different signs). (E). The increase in wages is accompanied by an increase in prices.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter3: Preferences And Utility

Section: Chapter Questions

Problem 3.10P

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Can explain to me how to solve the question? TQ 1. Suppose the marginal rate of substitution is constant at 6 for all possible consumption bundles. Next suppose that the price of good 1 decrease and the ratio P1/P2 is greater than 6. Show that the income and substitution effects from this price change are both zero.
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Mrs. Griffiths earns $5000 a week and spends her entire income on dresses and handbags, since these are the only two items that provide her utility. Furthermore, Mrs. Griffiths insists that for every dress she buys, she must also buy a handbag. What would be the new marginal rate of substitution that corresponds to the optimal consumption choice? Interpret the marginal rate of substitution.
For this question, assume that indifference curves are strictly convex, consumption andleisure are normal goods, and the optimal amounts of consumption, leisure, and labor arealways positive. A wage increase ______. (SE = substitution effect; IE = income effect)(a) increases labor supply via the SE and decreases labor supply via the IE(b) decreases labor supply via the SE and decreases labor supply via the IE(c) increases labor supply via the SE and increases labor supply via the IE(d) decreases labor supply via the SE and increases labor supply via the IE(e) Can’t tell without knowing the utility function
Consider a representative consumer in a two goods economy of x and y. The price of good x is 1 TL and the price of y is 3 TL. This consumer is spending all his income at the basket he is currently consuming, and his marginal rate of substitution (MRS) of x for y is 2. Is he at an optimum? If so, show why. If not, explain how he can achieve an optimum point in order to maximize his utility?
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4. Graphically decompose the impact of a price increase into the substitution effect and the income effect using both the Hicksian and the Slutsky methods. Assume the affected good is a normal good.
Mrs. Griffiths earns $5000 a week and spend her entire income on dresses and handbags. Since these are the only two items that provide her utility. Furthermore, Mrs. Griffiths insists that for every dress she buys, she must also buy a handbag. Dress is $25 and handbags is $14. i. Suppose the price of a dress increases to $200 and income decreases to $4200. What would be the new marginal rate of substitution that corresponds to the optimal consumption choice? Interpret the marginal rate of substitution.
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Hello, I need assistance in working this through, step by step. I understand the MRS concept, but need help in the algebra to solve it Given the following utility function: U = 100X0.25Y0.25 and marginal rate of substitution: MRS = −0.25Y0.25X A consumer facing the following prices: Px =$10, Py= =$2 chooses to consume: 5 units of good X and13units of good Y. Given this consumption bundle, the marginal rate of substitution is equal to -??(Round your answer to two decimal places. Note that the minus sign is already included.). Given this value, the consumer should consume ▼ more Y and less X the same amount of X and Y more X and less Y in order to maximize his/her utility.
Suppose pizza(P) and hamburger(H) are perfect substitutes for Andy. He is always willing to substitute two pizzas for one hamburge(b) The price of pizza is pP = $2 per pizza and the price of hamburger is pH = $2 per hamburger.What is Andy’s optimal consumption bundle if his income level is $30?(c) To promote the sale of pizza, now the owner of the pizza restaurant decides to give out the first two pizzas to every consumer for free, and af- terwards, if the consumer wants more, the consumer will still pay at the price of pP = $2 per pizza. If the price of hamburger and Andy’s income are same as before,draw Andy’s budget line. What is Andy’s optimal con- sumption bundle in this case?(d) Now,to promote the sale of pizza, instead of giving out the first two pizzas for free, the owner of the pizza restaurant decides to lower the price of pizza to $0.8 per pizza. Given price of hamburger and Andy’s income remain the same as before, what is Andy’s optimal consumption budle now? Compare with…
Mrs. Griffiths earns $5000 a week and spend her entire income on dresses and handbags. Since these are the only two items that provide her utility. Furthermore, Mrs. Griffiths insists that for every dress she buys, she must also buy a handbag. i. Draw an indifference curve showing the optimum choice. What would be the marginal rate of substitution at the point that corresponds to the optimal consumption choice? Interpret the marginal rate of substitution.