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Explain how a demand curve can be derived by observing the outcomes of price changes in the utilitymaximization model.
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- How does the utility-maximization model help highlight the income and substitution effects of a price change. Provide an example please.Discuss how the utility-maximization model helps highlight the income and substitution effects of a price change.Which axiom of the exponential discounted utility model is violated by the quasi-hyperbolic ( β,δ) model? Explain.
- What are some key points about the utility-maximization modelThe horizontally oriented definition of DEMAND states that "demand is the quantitites of a good that buyers are willing and able to buy at various prices in a given time interval." Which of the following statements are TRUE? If I really like a good, it does not matter how much I am able to afford to spend on it. The demand for a good is a specific amount. Demand is a behavioral relationship expressing what quantities buyers would want and be able to buy at various prices. If I can't afford to buy a product at today's available prices, I do not have a demand. The demand is all the possible price quantity combinations Demand depends on the availability of supply. Demand is a relationship between price as a variable and quantity demanded as a variable. Demand is a flow and requires a time interval be be fully understood.Which of the following behaviors contradict the standard discounted utility model? (A) hyperbolic discounting; (B) context effffects; (C) preference for commitments; (D) all of the above.
- It is an established fact in economics that for goods which are described as inferior goods, when incomes of consumers increase, consumers tend to reduce their consumption of such goods and rather patronize goods which would normally provide higher satisfaction .If a researcher decides to undertake a study to verify the general preposition that as incomes rise, the consumption of inferior goods falls, which type of economic study and what analysis is this? Justify your answer.Consider a budget constraint model with two goods X and Y. Suppose X is an inferior good, and the price of Y decreases. The substitution effect says we’ll demand _____ of good X, while the income effect says we’ll demand ______ of good X. Less; less More; less Less; more More; more Skip this question (or leave all choices blank)What is the difference between deterministic and random variations in the pattern of demands? Provide an example of a real problem in which predictable variation would be important and an example in which random variation would be important.
- Under the ordinal theory, a consumer is expected to rank his or her scale of preference from the least to the most satisfying. From this knowledge, describe the assumptions of the ordinal utility theory With the help of illustrations, show how the consumer attains equilibrium under the indifference curve approach As a student of microeconomics, use the knowledge attained during the teaching-learning process and show how the demand curve is derived under the cardinal theory approach .Assume you spend your entire income on two goods X & Y with prices given as PX & PY, respectively. Prices and income (I) are exogenous and positive. Given that U= X2Y 2 , derive the Hicksian demand function for good Y.With the help of illustrations, show how the consumer attains equilibrium under the indifference curve approach ., use the knowledge of micro economics and show how the demand curve is derived under the cardinal theory approach
