Chuck and Diane are both currently consuming 15 apples and 3 bananas each week, which we can call bundle A. Assume that bananas are the horizontal axis good for both consumers. Let's say both Chuck and Diane consume one more banana each week (4 bananas in total), moving to their respective bundle B on their own indifference curves. In order for Chuck and Diane to remain on the same indifference curve: • Chuck must give up 3 apples, to account for the marginal utility gained from a fourth banana • Diane must give up 5 apples, to account for the marginal utility gained from a fourth banana Based on the information above, what can we tell about Chuck and Diane's preferences?
Q: Calculating Price Elasticity Qd = 30 – 3*P P = 2 P = 5 P = 8 P = 6 Calculate elasticity of the…
A: Price elasticity refers to the percentage change in the quantity demanded for a given percentage…
Q: Use an ISLM model to analyze the effects of a money supply increase on the interest rate and GDP
A: In the ISLM framework, money supply affects the LM side. An increase in money supply is also called…
Q: QUESTION 11 A means that the government is spending as much as what it is collecting in taxes.…
A: A _ means that the government is spending as much as what it is collecting in taxes.
Q: PRICE LEVEL 200 180 160 140 120 100 80 60 40 20 + 0 1 AD Real GDP and Natural Real GDP SRAS 2 LRAS 3…
A: The SRAS is up inclining(upward sloping) a direct result of the misperceptions hypothesis, the tacky…
Q: Please provide examples of what is an emerging economy and its definition?
A: An economy is a system of interrelated production and consumption exercises that eventually decide…
Q: Label each curve with its appropriate name. ● Carefully draw a new set of cost curves (and label…
A: When the average cost declines with an increase in the production of goods, marginal cost is less…
Q: A tariff is O any non-tax action used to restrict trade. O a tax imposed on incomes of consumers of…
A: Meaning of Trade: The term trade refers to the situation under which the products and goods are…
Q: Explain why we model the demand for real money balance as a function of national income and the…
A: Introduction As income increases then demand for money also rises. As the interest rate rises the…
Q: Explain why each of the following statements is True, False, or Uncertain according to economic…
A: In the first part, as the marginal cost curve is the supply curve for the firm as well. Hence…
Q: If the expected real interest rate of 5% and expected inflation rate of 3%, then the nominal…
A: Meaning of Interest Rate: Here, the term interest rate is that exceeded amount being charged by…
Q: Huang is determining how much Coke and Pepsi he will buy. Use the information in italics to answer…
A: Utility : U=2C+3P We will try to prove each statement correct/ incorrect step by step: Option A…
Q: Suppose output per worker in a country has grown at the same rate as technology over many years.
A: Growth refers to sustained increase in real GDP per capita of a country over long period.
Q: Take a look again at Figure 1 (originally from the page in the text titled "Neoclassical and…
A: The difference between real GDP and potential GDP, when both are measured in real terms, is known as…
Q: Monopolistically competitive firms do not create product differentiation by Select one: Brand…
A: Monopolistically competitive firms sell slightly differentiated but not perfect substitute products.…
Q: Question 3 Person A and Person B produces purses and wallets. The production possibilities frontier…
A: The production possibility frontier represents different combination of goods which an economy can…
Q: Suppose that the supply and demand schedules for a product are as follows: Price $1 $5 $10 $15 $20…
A:
Q: The production manager of a clothing manufacturer estimates that the daily total cost of producing…
A: A firm always faces two types of costs which are fixed costs and variable costs. Fixed costs are…
Q: Using the graph on the next page, do the following problems: Determine the profit maximizing level…
A: The marginal cost (MC) curve is calculated by dividing the change in total cost by the change in…
Q: What is an example of calculating IRR?
A: For calculation of IRR We utilized the method of interpolation to compute IRR. This requires the…
Q: plain the difference between a demand schedule and a demand curve. Would ther e one rather than the…
A: Quantity demanded is an expression utilized in economics to explain the total amount of a good or…
Q: K Find equilibrium GDP using the following macroeconomic model (the numbers, with the exception of…
A: The value of all the goods and services produced over the course of a given time period on a…
Q: Give four (4) economic activities that generate both positive and negative externalities?
A: We know that An externality is a positive or negative side effect of production or consumption in…
Q: The Corvette When the C8 Corvette first arrived back in June of 2019, the world was shocked to see…
A: Price elasticity of demand refers to the percentage change in quantity demanded with respect to…
Q: The demanders in the goods-and-services market are the government and business firms households, the…
A: A circular flow model in the economy includes mainly four sectors, household sector, business firms…
Q: Pedro made 24 payments of P200,000.00 each, and all payments are made at the beginning of each year.…
A: Given Annuity =P200,000 Number of payments =24 All payments are made at the beginning of each year.…
Q: Tools DS voiding 4. Using the rule of 70 Consider an imaginary economy that has been growing at a…
A: The rule of 70 permits you to calculate how long the amount invested will double. For this, just…
Q: 7.2. A consumer has a utility function u(x₁, x₂) = max{₁, 2}. What is the consumer's demand function…
A: The max function generally represent the combination of 2 or more then 2 which is not consume in…
Q: The demand curve of a monopolistically competitive form is Select one: Perfectly inelastic…
A: Demand curve refers to the quantity that a consumer wishes to buy at a give price in given period of…
Q: It's October 21 and the air conditioner at the Brown household has just gone out. Fortunately, they…
A: FV = 3,500 n = (deposit from 21 Jan to 21 may) i.e. 5 months r = 1.25% per month
Q: Carefully explain what is happening in the market for leather belts. Indicate the impact if any on…
A: Demand curve shows association between quantity demand and price. Similarly, Supply curve depicts…
Q: Statements that our students arrive at are as follows: (a) To have a consistent ordering and…
A: Introduction The indifference curve represents all the combinations of goods that give the same…
Q: Which one of the following is the best example of someone acting according to the assumptions of the…
A: The neoclassical model, which is based on labour, capital, and technology, describes continuous…
Q: Consider two markets. The initial equilibrium for both markets is the same, P = $6.50 and Q = 35.0.…
A: The elasticity of supply measures the degree of sensitivity of quantity supplied to change in the…
Q: For a monopoly, the demand and cost functions are: Demand: Q = 100 -0.20P Cost: TC= 10 + 60Q Solve…
A: A monopolist always maximizes profit where: Marginal Cost = Marginal Revenue MC = MR Total…
Q: 9
A: A market structure in which there is only one seller and only one type of product available. A…
Q: Does the quantity of the good on the y-axis affect the consumer's utility if the indifference curve…
A: The indifference curve describes the potential pairings of two commodities that produce the same…
Q: What are five pros and cons of tariffs?
A: Since you have asked multiple question, we will solve the first question for you. If you want any…
Q: (1) Draw an Edgeworth box and show the initial allocation of goods, to be labelled e. Indicate the…
A: Here the lower left hand side corner is the point of origin for David and the top right hand corner…
Q: Suppose that one factory inputs its goods from two different plants, A and B, with different costs,…
A: Given that, Inputs of the factory from the plant A=4 Inputs of the factory from the plant B=7…
Q: In the long-run, the representative firm in monopolistic competition tends to have: Select one: A…
A: A market structure characterised by monopolistic competition has numerous large vendors, each of…
Q: The amount of the tax per unit is $ Buyers pay $ Sellers pay $ of the tax per unit. of the tax per…
A: Buyer pay of tax per unit is = Price paid after tax - price paid before tax Seller pay of tax per…
Q: QUESTION 9 If the demand for coffee beans is inelastic, then a rise in the price of those beans will…
A: The degree to which the effective desire for commodity changes as the price(P) of that commodity…
Q: Resource demand Select one: a. Does not depend upon the productivity of the resource b. Is a direct…
A: The demand for a good refers to the quantity of the good consumers are willing and able to purchase…
Q: Samson bought a new cutting machine for P5,000,000.00. The machine could be sold for P50,000.00…
A:
Q: What two factors must be kept in mind when comparing different countries’ standard of living, and…
A: A country's or region's economic material aspects are gauged by the standard of living. It measures…
Q: Need help with putting the peak and trough.
A: Business cycle shows the fluctuation of the economy between the period of growth and recession. Peak…
Q: Flavor Flav has released a new exercise DVD for his loyal fans. If he charges $20 he expects to sell…
A: Given, P1=$20Q1=10,000P2=$30Q2=8,000 Price elasticity of demand depicts the responsiveness of change…
Q: The production possibilities frontier (PPF) is a simplified economic model that illustrates the…
A: A production possibility frontier is a graph which depicts various combinations of two goods that…
Q: PRICE (Dollars per unit) 140 70 50 egion etween W and X etween X and Y etween Y and Z each of the…
A: Price elasticity of demand is the proportion of the rate change in the quantity demanded of an item…
Q: If property rights are held or shared by a large number of people, and each person has veto power,…
A: A veto refers to a legal power on unilaterally stopping the official action. A free rider problem…
Step by step
Solved in 2 steps
- Suppose there are two individuals, Jane and Keith. Jane's utility function is Uj = XY, while Keith’s is Uk = X^2 Y^2 . Where X and Y are two separate goods. a) Find the marginal utilities of the two goods for Jane and Keith. b) Sketch the marginal utilities for Jane and Keith. c) What do the marginal utilities tell us about their tastes? d) Show by implicit differentiation that, for any given combination of X and Y, Jane's indifference curve has the same slope as Keith's.Reese thinks peanut butter and chocolate are great when separate, but when they combine they are even more epic. In other words, Reese likes to eat either peanut butter or chocolate, but when he eats them together, he gets additional satisfaction from the combination. His preference over peanut butter (x) and chocolate (y) is represented by the utility function: u(x, y) = xy + x + y Suppose that now Reese loses almost his entire income, so that he is left with only one dollar, i.e. his new income is I0 = 1. If prices are still px = 2, py = 4, what is his new optimal consumption of x and y (Hint: Remember that consumption of both goods must be weakly positive, i.e. x∗ ≥ 0 and y∗ ≥ 0) (a) x∗ = 0.5, y∗ = 0(b) x∗ = 0.25, y∗ = 0(c) x∗ = 0.75, y∗ = 0.25(d) x∗ = 0.75, y∗ = 0(e) x∗ = 0.5, y∗ = 1Continue to consider Ronald from Q1. Suppose that Ronald’s preferences over movies and climbing are such that he likes them exactly equally: he is always willing to trade one movie for one climbing session and remain exactly as well of as he was before. One valid utility representation of Ronald’s preferences is u(x, y) = x + y. (a) On the same picture as before, plot indifference curves for the utility levels u = 5.8, 10, 14.2, 18.4. (b) Compute Ronald’s marginal utilities for each good. Using the marginal utility formulas you have just computed, prove that Ronald’s preferences are strongly monotone. (c) i. Label three distinct bundles (x, y) on the indifference curve corresponding to a utility of 5.8. ii. Hence, or otherwise, argue that his preferences are not strictly convex. (d) i. Explain why Ronald’s optimal consumption bundle must lie on the outer boundary of his budget set. ii. Identify Ronald’s optimal bundle by visual inspection. Briefly explain what you did. iii. Find…
- Reese thinks peanut butter and chocolate are great when separate, but when they combine they are even more epic. In other words, Reese likes to eat either peanut butter or chocolate, but when he eats them together, he gets additional satisfaction from the combination. His preference over peanut butter (x) and chocolate (y) is represented by the utility function: u(x, y) = xy + x + y Which of the following is NOT true about Reese’s preference? (a) The MRS decreases when x increases.(b) The preferences are homothetic.(c) The marginal utility of y is higher when x = 10 than when x = 5.(d) For any a > 0, Reese prefers the bundle (x =a/2 , y = a/2 ) over either the bundle (x = a, y = 0) or (x = 0, y = a).We claimed in the text that if preferences were monotonic, then a diagonal line through the origin would intersect each indifference curve exactlyonce. Can you prove this rigorously? (Hint: what would happen if itintersected some indifference curve twice?)please only do: if you can teach explain each partc: what does it mean? can you show graphs: For these to be optimal choices with such preferences, the indifference curve through a must lie entirely on or above the budget line associated with (p, w), and simi- larly for r' for the budget line associated with (p', w'). how do you know this:Because each of these bundles lies below the other budget line, this implies that the indifference curves must cross, which is impossible. can you show graphs: note that (3,1) is a conver combination of x and x', so for conver preferences must be weakly preferred to x (the less preferred bundle between a and a'). But then the bundle (3,5/3) must be strictly preferred z, contradicting that is optimal given the initial budget set
- What do we mean by well-behaved preferences? How do the indifference curves look like for suchpreferences? Provide an example, in terms of a utility function, where preferences are not well-behavedand illustrate. Provide a figure with indifference curves and a budget line where there are exactly twosolutions to the utility maximization problem.A consumer with income I=120 facing prices pX = 4 and pY = 8 for two goods X and Y (for each good she prefers more to less) chooses optimally to consume 12 units of X. If the prices change and now pX = 6 and pY = 4, what is the possible range for her optimal X consumption? (like, x >/ 7 or 10 >/ x >/7…etc. Use indifference curve analysis on a graph to reason about the possible locations of the new optimal bundle.)Carol needs to decide how to spend her wealth on sh and chicken.For Carol, 1 lb of sh is equivalent to 2 lb of chicken. Her preferencecan be represented by the utility functionu(x; y) = 2x + ywhere x is the quantity of sh (in lbs) and y is the quantity of chicken(in lbs). The consumption set is R2+. (a) Draw two typical indi erence curves for Carol, one correspondingto a utility level of u1 and one corresponding to a utility level u2,where 0 < u1 < u2. Make sure you label the slope of the indif-ference curves and the intercepts with the horizontal and verticalaxes.(b) Suppose the price of sh is $1:5 per lb and and the price of chickenis $1 per lb. Carol has $20 to spend on sh and chicken.(i) Draw Carol's budget set, labeling the slope and the interceptpoints clearly.(ii) How much sh and chicken will Carol choose to purchase? I am looking for an answer to the points (c) and (d) below (c) Suppose now that the price of sh increases to $2 per pound.(i) Draw Carol's budget set,…
- Mr. A derives utility from martinis (m) in proportion to the number he drinks: U(m) = m Mr. A is particular about his martinis, however: He only enjoys them made in the exact proportion of two parts gin (g) to one part vermouth (v). Hence we can rewrite Mr. A’s utility function as U(m) = U(g,v) = min (g/2, v). a. Graph Mr. A’s indifference curve in terms of g and v for various levels of utility. Show that, regardless of the prices of the two ingredients, Mr. A will never alter the way he mixes martinis. b. Calculate the demand functions for g and v. c. Using the results from part (b), what is Mr. A’s indirect utility function? d. Calculate Mr. A’s expenditure function; for each level of utility, show spending as a function of pg and pv. Hint: Because this problem involves a fixed-proportions utility function, you cannot solve for utility-maximizing decisions by using calculus.Suppose Jane spends $48 each month on Oreo cookies with a price of $2 per package, and salt and vinegar chips with a price of $3 per bag. a) With chips on the horizontal axis, draw Jane budget constraint, making sure to indicate the horizontal and vertical intercepts. b) Suppose that at current prices, Jane purchases 6 bags of chips each month. Draw an indifference curve tangent to Jane budget constraint consistent with this choice (assume Jane is maximizing her utility). Label her chosen bundle with the letter A. How many packages of Oreos does Jane buy? c) Suppose that the price of chips falls to $2 per bag, and Jane increases her chip consumption to 8 bags each month. Draw Jane’s new budget constraint and indicate her chosen bundle with an appropriately drawn indifference curve. Label her utility-maximizing bundle with the letter B. (Be sure to determine the right quantities of both chips and Oreos!) d) A major chip producer has experienced a fire, and the disruption of supply has…Bottles of water sell for 1 euro and slices of chocolate cake sells for 3 euros. Suppose Jack, whose preferences satisfy all of the basic assumptions of consumer choice theory, buys 5 bottles of water and one slice of chocolate cake every day. At this consumption bundle, his MRS of bottles of water for slices of chocolate cake is 3 (i.e. he is willing to give up 3 bottles of water to get an additional slice of cake). Which of the following is true? (Hint: draw this situation with bottles of water on the vertical axis and slices of cake on the horizonal axis). A. Jack could increase his utility by buying fewer bottles of water and more slices of cake. B. Jack could increase his utility by buying more bottles of water and less chocolate cake. C. Jack could not increase his utility because it is already at a maximum level. D. Jack could increase his utility by buying more bottles of water and more chocolate cake.