Consider a person who is endowed with 10 units of P and 10 units of G. If you observe the person not buying or selling Good Pand G, the person's BL is the ( Select ) If you observe the person selling G and using the proceeds to buy P the person's BL is ( Select ) If you observe the person selling P and using the proceeds to buy G the person's BL is ( Select )

Consider a person who is endowed with 10 units of P and 10 units of G. If you observe the person not buying or selling Good Pand G, the person's BL is the ( Select ) If you observe the person selling G and using the proceeds to buy P the person's BL is ( Select ) If you observe the person selling P and using the proceeds to buy G the person's BL is ( Select )

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter3: Preferences And Utility

Section: Chapter Questions

Problem 3.12P

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The one-period model with quasi-linear utility predicts that a decrease in marginal income tax rates could increase tax collection if:Group of answer choices Substitution effects dominate income effects so that the percent change in taxes is greater than the percent change in GDP Substitution effects dominate income effects so that the percent change in taxes is less than the percent change in GDP Income effect dominate substitution effects so that the percent change in taxes is less than the percent change in GDP Income effects dominate substitution effects so that the percent change in taxes is greater than the percent change in GDP
answer please, additional information has been given. Assume you can work as many hours you wish at £12 per hour (net of tax). If you do not work, you have no income. You have no ability to borrow or lend, so your consumption, c, is simply equal to your income. d) Now assume that you receive an income of £140 per week from an unknown benefactor. Show the impact on your feasible set, and show a new optimal choice in which consumption increases but labour supply de Using the concept of the marginal rate of substitution, explain why this is a likely outcome. e) Now assume that, starting from the optimal point in d), your wage increases to £18 per hour. Explain why the impact of this change is ambiguous, and relate to the long-run historical experience of wage growth in rich countries.
A worker receives a wage rate w and has L hours of leisure every day (the total endowment of hours is 24 hours per day). The government gives a subsidy of rate s of her income (i.e. her income is (1+s) times what it would be without the subsidy). The worker cannot save, and initially faces no tax. She consumes a single consumption good, c. 1. Write a budget constraint for this individual and plot it. 2. Suppose that the worker has well-behaved preferences, i.e. she likes more consumption and leisure rather than less, she dislikes working, and she has decreasing marginal utility in consumption and leisure. a. Display graphically what the optimal consumption-leisure choice for this worker (no need for exact numbers as we don’t know the utility function; give intuition) 3. Imagine that instead of a subsidy rate, s, the government imposes income tax at rate t. What is the new budget constraint? Display on the same picture. In the new optimum, is the consumption higher? Explain the answer…
In this hypothetical economy, there are two consumers living over two periods of life. Ann’s incomes are $50,000 in both periods. Meanwhile, Bob earns nothing in the first period but $105,000 in the second period. Both of them can borrow or lend at the interest rate r. For simplicity, assume that there are no taxes. a) Assume that both Ann and Bob consume $50,000 in the first period and $50,000 in the second period. Write down the lifetime budget constraint for each consumer then calculate the interest rate r. Describe the economic behavior of each consumer. b) Suppose the interest rate increases. What will happen to Ann’s consumption in the first period? Is Ann better off or worse off than before the interest rate rises? Explain your answer using an appropriate diagram c) What will happen to Bob’s consumption in the first period when the interest rate increases? Is Bob better off or worse off than before the interest rate increases? Explain your answer using an…
In this hypothetical economy, there are two consumers living over two periods of life. Ann's incomes are $50,000 in both periods. Meanwhile, Bob earns nothing in the first period but $105,000 in the second period. Both of them can borrow or lend at the interest rate r. For simplicity, assume that there are no taxes. a)Assume that both Ann and Bob consume $50,000 in the first period and $50,000 in the second period. Write down the lifetime budget constraint for each consumer then calculate the interest rate r. Describe the economic behaviour of each consumer. b) Suppose the interest rate increases. What will happen to Ann's consumption in the first period? Is Ann better off or worse off than before the interest rate rises? Explain your answer using an appropriate diagram c) What will happen to Bob's consumption in the first period when the interest rate increases? Is Bob better off or worse off than before the interest rate increases? Explain your answer using an appropriate diagram.
Suppose that the government imposes a proportional income tax on the representative consumer’s wage income. That is, the consumer’s wage income is w(1 − τ )(h − l) where τ is the tax rate. (a) Determine effect of a decrease in income tax on consumption and labor supply. Explain your results in terms of income and substitution effects. Show the income and substitution effect in a graph. (b) Is your answer in (1) consistent with the observation that hours of work in European countries is about 30% less than in the U.S, while the average income tax rate is about 60% in European countries and 40% those in the U.S.? Under what condition? Please show all your work. Please do all parts of eth question. Thank you for yourhelp.
Suppose there are two goods, coffee (C) and tea (T). The consumption set is R2+, so both goods can be consumed in arbitrary non-negative quantities. Abdul owns 2000 grams of coffee but does not own any tea. He has no other wealth. The price of coffee is Pc = 2 (in Dhs per gram) and the price of tea is PT > 0 (in Dhs per gram). Abdul can sell coffee to earn income, which he can then use to buy tea or coffee. He can also throw coffee away (at no cost). Abdul's preferences can be represented by the utility functionu(c; t) = -(800 - c)2 -(800 - t)2; where c is the quantity of coffee (in grams) and t is the quantity of tea(in grams). a) Illustrate Abdul's demand for coffee as a function of the price of tea (PT > 0) in an appropriate diagram.
Suppose there are two goods, coffee (C) and tea (T). The consumption set is R2+, so both goods can be consumed in arbitrary non-negative quantities. Abdul owns 2000 grams of coffee but does not own any tea. He has no other wealth. The price of coffee is Pc = 2 (in Dhs per gram) and the price of tea is PT > 0 (in Dhs per gram). Abdul can sell coffee to earn income, which he can then use to buy tea or coffee. He can also throw coffee away (at no cost). Abdul's preferences can be represented by the utility functionu(c; t) = -(800 - c)2 -(800 - t)2; where c is the quantity of coffee (in grams) and t is the quantity of tea(in grams). a) In separate diagrams, illustrate (i) the map of Abdul's indifference curves, (ii) Abdul's constraint set. b) How much coffee and tea does Abdul decide to consume when (i) PT = 2, (ii) PT = 3, and (iii) PT = 4? c) Illustrate Abdul's demand for coffee as a function of the price of tea (PT > 0) in an appropriate diagram.
Assume that consumption and leisure are perfect complements, that is, the consumer always desires a consumption bundle where the quantities of consumption and leisure are equal, that is, C=L 1) (Denote the total hours of time available by h, the real wage by w, the real dividend income from firms by pi (π), and the lump-sum tax by T. Write down the consumer’s budget constraint. 2) Determine the consumer’s optimal choice of consumption and leisure. 3) Assume that there is an increase in w . Show how the consumer’s optimal consumption bundle changes. Explain with reference to income and substitution effects
Consider food stamps where the government gives a person $100 worth of food stamps that can only be used to buy food. When the person buys food instead of paying cash he gives an equivalent value of food stamps, e.g. if he buys $50 of food he must surrender $50 of food stamps. After his food stamps are exhausted, the person can continue to buy food but must pay cash. The person's budget line when he receives food stamps shows all the combinations of the 2 goods he can buy using his monetary income plus his food stamps together and is kinked.
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
With the use of graphs state how the Consumer’s optimum in the Fisher’s Intertemporal Choice Model.