Demand Curve when shifted to guhe left becomes a. moves upward and downward sloped b. negatively sloped c. at equilibrium d. positively sloped In an indifference curve concept if if point x is below the indifference curve, how is point X described? a. cost was achieved b. not minimum c. not maximum d. cost was not achieved In an indifference curve concept if if point xyz falls in a particular Indifference curve, how is point X described? a. z may have lesser satisfaction b. Y may have higher satisfaction c. there is satisfaction yielded d. xyz are tangent with each other

Demand Curve when shifted to guhe left becomes a. moves upward and downward sloped b. negatively sloped c. at equilibrium d. positively sloped In an indifference curve concept if if point x is below the indifference curve, how is point X described? a. cost was achieved b. not minimum c. not maximum d. cost was not achieved In an indifference curve concept if if point xyz falls in a particular Indifference curve, how is point X described? a. z may have lesser satisfaction b. Y may have higher satisfaction c. there is satisfaction yielded d. xyz are tangent with each other

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter5: Income And Substitution Effects

Section: Chapter Questions

Problem 5.14P

See similar textbooks

Similar questions

Utility is given as: U(x, y) = x^1/2y^1/2 (a) Graph a typical indifference curve for this function. (Hint: Choose a level of utility and draw various combinations of x, y that result in that level (b) Write down the marginal utility of both x and y. (c) What is the marginal rate of substitution (MRS) for this function? (d) Give examples of goods that are well represented by this model.
At two points on an indifference curve,a. the consumer has the same income.b. the consumer has the same marginal rate ofsubstitution.c. the bundles of goods cost the consumer the sameamount.d. the bundles of goods yield the consumer thesame satisfaction.
Explain the consumer equilibrium point by using Indifference Curve Approach andthe Budget Line. What is the necessary condition for the consumer equilibrium? Explain whyconsumer is not in equilibrium if this condition does not fulfil
Utility Maximization. Suppose that an individual has a utility function given asU =√XYwhere U is the total utility, X is the quantity of good X that is consumed, and Y is the quantity ofgood Y consumed.It follows thatMUxMUy= X/Ywhere MUx is the marginal utility of X and MUy is the marginal utility of Y.The individual’s budget constraint isI = PxX + PyYwhere I is income, Px is the price of good X, and Py is the price of good Y.Suppose that Px = 2, Py = 1, and I = 100. How much of X and Y does this individual purchase?
A consumer’s preferences between goods x and y are representedby the utility function u(x, y) = 2min{x, y}+10. Suppose this consumer hasincome of $16, the price of good x is $3 and the price of good y is $1. Suppose the price of good x increases to $7 while the price of good y andthe consumer’s income stay constant. Calculate the magnitudes of the compensating and the equivalent variations. Explain what each measures.
a good is normal, then an increase in the price of the good will lead to which of the following to be true for this good? (Assume that there are only two goods, the individual's preferences lead to well-behaved preferences with strictly convex indifference curves and an interior solution for all budgets). Let SE = substitution effect, IE = income effect) (a) The magnitude of the IE for this good must be larger than the magnitude of the SE (b) The magnitude of the SE for this good must be larger than the magnitude of the IE (c) The good could be a Giffen good d) The good must be an ordinary good ( (e) None of the above
Charlie has utility function U(x1, x2)= x1x22 over two goods. This is a special case of the Cobb-Douglasutility function.a. Write the equation of the indifference curve with utility value C. Hint: Set U(x1, x2) to Cand solve this equation for x2.b. Draw two indifference curves passing through points (4,1) and (9,1/3). Which bundle ismore preferred?c. Are the preferences convex?d. Find the marginal utilities for good 1 and good 2. Hint: compute the partial derivatives.e. Write the formula for the marginal rate of substitution between goods 1 and 2.f. What is the MRS for bundle (4,1)? Give economic interpretation of this MRS.g. Does the utility exhibit a diminishing marginal rate of substitution?
Hella the Greek's preferences can be described by the utility function U(x, y) = (x^1/2 + 3^1//2)^2. (a) What is the indifference curve for a utility of 49? (b) By how much does utility increase when Hella increases consumption of good y by one (small) unit, when initially U = 49 and x = 1? (c) Holding utility constant at 49, if initially x = 1, how many additional (small) units of y does Hella have to consume if her consumption of x drops by 6 (small) units?
Depart from the represented preferences U(x,y)= min {x, 4y} 1. Draw two indifference curves for the given utility function and show the preferred points, by providing examples. 2. Explain mathematically the MRS for the different parts of this type of IC.
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 increases
Suppose an individual has the following utility function: U(x,y)=−4(x−5.5)^2 −2(y−3.5)^2 Further assume that the price of good x, px = $6, the price of good y, py = $8 and the individual has an income m = $65 a) Draw an indifference curve (one IC is enough) that represents this person’s prefer- ences. Please label the graph properly including values for x and y. b) Intuitively, and without formally solving, can you guess the maximized values x* and y*for the above utility function. Explain your answer. c) Derive the optimal values x*and y*by formally solving the above utility function subject to the above constraint. You can use any of the utility maximization techniques we learned in class. d) Compare your answers in parts b) and c). Based on the utility function that is given in this problem as well as the budget constraint, can you explain the differences between the answers you found in parts b) and c) (if any). Be as detailed as possible with your explanation.
Draw a well-labeled graph that shows the substitution effect (SE), incomeeffect (IE), and total effect of good 1 and is consistent with the following: The consumerreceives $m per month and has well-behaved preferences with strictly convex indifferencecurves; the price of good 1 increases; the original utility-maximizing point is labeled at A; thenew utility-maximizing point is labeled C; the compensated budget’s utility maximizing point islabeled B; good 1 is inferior but not Giffen. Make sure to clearly state and graphically showwhether the SE, IE, and total effect of good 1 are each positive or negative. Also state if the SEor IE is higher in magnitude if possible. Good 1 needs to be on the horizontal axis.