Explain how an optimal decision of a consumer can be achieved by using utility-maximizing theory and revealed preference theory, please explain about how they are different and how they will get the same outcome!
Q: Q- Marginal utility can never be negative. True/False
A: Total utility is the total satisfaction that a consumer derives when he consumes goods and services.…
Q: Luke has a monthly income of $80. He spends this money making telephone calls from home (measured in…
A: Given information: Luke's Monthly income of $80 Plan A: at 0 monthly fees, make calls for $0.50 per…
Q: What kind of preferences are represented by a utility function of the form u(x1, x2) = √x1 + x2?…
A: If the MRS is constant for both the goods, it implies that the consumer is ready to exchange one…
Q: Drawing indifference curves: Carl likes taking the rides at Disneyland, but dislikes standing in…
A: Production possibility frontier (PPF) shows a probable combination of two commodities produced in an…
Q: State the implications of the weak axiom of revealed preference (WARP) for consumer choice. The…
A: This axiom states that given incomes and prices, if one product or service is purchased instead of…
Q: Rick thinks either Morty or Summer broke his TV. Morty and Summer each have to decide simultaneously…
A: Hi, thank you for the question. As per our Honor code, we are allowed to attempt only first three…
Q: I am always willing to exchange one Coke (C) for two Pepsis (P), no matter how many Cokes I have…
A: The utility function is used to measure the preferences of the consumer. It represents the level of…
Q: PROBLEM (2) Ice cream and cakes are perfect substitutes for a child, and 2 units of ice cream is…
A: Problem (2): (a)The microeconomic theory of utility maximization states how a consumer chooses his…
Q: Explain the consumer equilibrium point by using Indifference Curve Approach and the Budget Line.…
A: The Budget Line shows all of the possible combinations of two goods that a consumer can afford at…
Q: Graphs of a consumer's indifference map and budget lines and possible demand curves: 130 100 15 Us…
A: The indifference Curve refers to the curve which shows all the combinations of two goods that give…
Q: If people do not have a complete mental picture of total utility for every level of consumption ,how…
A: Total utility: It refers to the total amount of satisfaction which a consumer gets from the…
Q: Distinguish between cardinal and ordinal utility
A:
Q: this week you have gone to two parties. assume the total utility you gained from these parties is…
A: The marginal utility is the difference between the total utility of the good and services with that…
Q: We claimed in the text that if preferences were monotonic, then a diag-onal line through the origin…
A: Indifference curve refers to the graphical representation of various combinations of two goods,…
Q: If David John's preferences are represented by the utility function U (x1, x2) = x1x2, how does the…
A: Given that the utility function U(x1,x2)= x1x2 We have to order the bundle based on the utility we…
Q: ighted twice as heavily as the 1st, what would your indifference curves between the two homework…
A: A utility perform might be a numerical connection that positions heaps of utilization stock by task…
Q: What is the axiom of consumer choice that implies that consumers spend all their income in order to…
A: The maximum utility is maximized where the last $ spent on each goods provide exactly same marginal…
Q: The law of explains why people and societies rarely make all-or-nothing choices. diminishing…
A: (A)
Q: 3. If MU,1/Px1 > MU,2/PX2 is the consumer maximizing his utility? Explain how to maximize it if your…
A: The change in total utility because of change in one more unit of consumption is termed as marginal…
Q: What do we mean when we say consumer preferences are complete and transitive?
A: Consumer preferences shows the taste of the consumer and how much satisfaction it receives from…
Q: H2. when Saturday comes, what is the utility of doing your roommate’s request on Saturday under…
A: Utility is an ordering that gives the levels of usefulness or satisfaction of the consumption of one…
Q: True/ false Describe Since a greater utility number indicates that a consumer is better off,…
A: Utility: Utility is used to model value or value. Its use has evolved significantly over time. The…
Q: Explain the consumer equilibrium point by using Indifference Curve Approach and the Budget Line.…
A: The equilibrium of consumer is established when he derives maximum satisfaction. In case of…
Q: What does revealed preference theory based on? a) Utility and demand b) Observed consumer behavior…
A: Revealed preference: Revealed preference is a theory relating to somebody's consumption patterns,…
Q: True or false. Maximizing choices occur when combinations of two goods are made such that they are…
A: An indifference curve is a contour line with the same utility at all points along the line. A line…
Q: What do we mean by well-behaved preferences? How do the indifference curves look like for such…
A: Since the question you posted consists of multiple parts, we will answer the first three parts for…
Q: An old nursery rhyme tells us : Jack Sprat would eat no fat; his wife would eat no lean. This tells…
A: Since you have asked multiple question, we will solve the first question for you. If you want any…
Q: Describe the point at which a consumer maximizes utility.
A: A rational consumer is going to be in equilibrium when his utility is maximized within a given…
Q: Refer to the information provided in table below. MU/P for Number of Cinema Tickets Total Utility…
A: a. The marginal (MU) utility of a good shows the additional satisfaction gained by an individual…
Q: The primary goal of very consumer is to maximize satisfaction. Explain, how a consumer achieves…
A: In economics, it is assumed that consumers are rational and they try to maximize their utility.…
Q: Ross is a race car driver. The more he races, the happier he is. The level of happiness Ross feels…
A: In economics, utility refers to the entire pleasure derived from the consumption of an item or…
Q: Mylie’s total utility from singing the same song over and over is 50 utils after one repetition, 90…
A: Marginal utility (MU) = Change in total utility (TU) / Change in number of repetitions (Q) When Q =…
Q: Troy is a utility maximizer. Describe the utility maximization condition. Using the available…
A: Laptop Cost = 750 Drones Cost = 2000 Income = 15,000
Q: Frank spends $75 on 10 magazines and 25 newspapers. The magazines cost $5 each and the newspapers…
A: To derive the highest utility a consumer need to allocate the money income(M) in such a way that the…
Q: Ning owns an Iphone 5. One day she loses her phone and contemplates a replacement. She considers…
A: Prof. Samuelson's theory of demand is based on the revealed preference axiom or hypothesis which…
Q: Calculate the Marginal Utility of Y What is the optimal Choice of X and Y given the PX = $6, PY = $2…
A: Marginal utility is the added satisfaction that a consumer gets from having one more unit of a good…
Q: What is meant by form utility?
A: Utility is an economic term which refers to satisfaction.
Q: Show the derivation of the individual demand function for a utility maximizer consumer and explain…
A: Utility refers to the satisfaction derived from consuming given goods and services. Budget…
Q: A consumer is making purchases of products Alpha and Beta such that the marginal utility of product…
A: The Equilibrium condition for utility maximization: MUa/Pa = MUb/Pb The marginal utilities per…
Q: Check if the following utility functions represent the same preferences: u = x+y, v = x3 + y3, w =…
A:
Q: Q48 As a consumer moves along an indifference curve, ... a. The combination of goods will vary,…
A: An Indifference curve is a combination of two goods that gives same level of utility. One of the…
Q: What is the axiom of consumer choice that implies that consumers spend all their income in order to…
A: The axiom of consumer choice that implies that consumers spend all their income in order to maximize…
Q: In defining preference relations over consumption bundles, we require the assumptions of…
A: Preferences of a consumer are subjective in nature. It means that the preferences of one consumer…
Q: When total utility is at a maximum, marginal utility is negative. O True O False
A: In the analysis of utility, it can be seen that total utility and marginal utility have a specific…
Q: Suppose the seventh carrot you consume provides a marginal utility of 1 util and after eating the…
A: Utility refers to the amount of satisfaction received by a consumer from the consumption of a good…
Step by step
Solved in 2 steps
- Take Jeremys total utility information in Exercise 6.1, and use the marginal utility approach to confirm the choice of phone minutes and round trips that maximize Jeremys utility.Jeremy is deeply in love with Jasmine. Jasmine lives where cell phone coverage is poor, so he can either call her on the land-line phone for five cents per minute or he can drive to see her, at a round—trip cost of 2 in gasoline money. He has a total of 10 per week to spend on staying in touch. To make his preferred choice, Jeremy uses a handy utilimometer that measures his total utility from personal visits and from phone minutes. Using the values in Table 6.6, figure out the points 011 Jeremys consumption choice budget constraint (it may be helpful to do a sketch) and identify his utility-maximizing point.Praxilla, who lived in ancient Greece, derives utility from reading poems and from eating cucumbers. Praxilla gets 30 units of marginal utility from her first poem 27 units of marginal utility from her second poem 24 units of marginal utility from her third poem, and so on, with marginal utility declining by three units for each additional poem. Praxilla gets six units of marginal utility for each of her next three cucumbers consumed, five units of marginal utility for each of her next three cucumbers consumed, four units of marginal utility for each of the following three cucumbers consumed, and so on, with marginal utility declining by one for every three cucumber consumed. A poem costs three bronze coins hut a cucumber costs only one bronze coin. Praxilla has 18 bronze coins. Sketch Praxillas budget set between poems and cucumbers, placing poems on the vertical axis and cucumbers on the horizontal axis. Start off with the choice of zero poems and 18 cucumbers, and calculate the changes in marginal utility of moving along the budget line to the next choice of one poem and 15 cucumbers. Using this step-by-step process based on marginal utility, create a table and identify Praxillas utility—maximizing choice. Compare the marginal utility of the two goods and the relative prices at the optimal choice to see if the expected relationship holds. Hint: Label the table columns: 1) Choice, 2} Marginal Gain from More Poems, 3) Marginal Loss from Fewer Cucumbers, 4) Overall Gain or Loss, 5) Is the previous choice Optimal? Label the table rows: 1) 0 Poems and 18 Cucumbers, 2) 1 Poem and 15 cucumbers, 3) 2 Poems and 12 cucumbers, 4) 3 Poems and 9 Cucumbers, 5) 4 Poems and 6 cucumbers 6) 5 Poems and 3 Cucumbers, 7) 6 Poems and 0 Cucumbers.
- Would you expect total utility to rise or fall with additional consumption of a good? Why?Is it possible for total utility to increase while marginal utility diminishes? Explain.Explain why individuals make Choices that are directly on the budget constraint, rather than inside the budget constraint DI outside it.
- No written by hand solution Assume Fred has the following preference relation on [0, 1]: x ≿ y if and only if x ≤ y for all x ̸= 1 and y ̸= 1; and 1 ≻ z for all z ∈ (0, 1), 1 ∼ 1 and 0 ≻ 1. Does there exists a utility representation for this preference relation? If yes, provide a utility function. If no, explain. Show your work.Suppose that a consumer has a choicebetween two goods, X and Y. If the price of X is $2 and the priceof Y is $3, how much of X and Y does the consumer purchaseper period, given an income of $17 per period? Use the followinginformation about marginal utility:Units MUX MUY1 10 52 8 43 2 34 2 25 1 2Explain 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
- Mylie’s total utility from singing the same song over andover is 50 utils after one repetition, 90 utils after tworepetitions, 70 utils after three repetitions, 20 utils afterfour repetitions, 250 utils after five repetitions, and 2200utils after six repetitions. Write down her marginal utilityfor each repetition. Once Mylie’s total utility beginsto decrease, does each additional singing of the songhurt more than the previous one or less than the previousone?Suppose the linear demand curve for shirtsslopes downward and that consumers buy 500 shirts per yearwhen the price is $30 and 1,000 shirts per year when the priceis $25.a. Compared to the prices of $30 and $25, what can you sayabout the marginal valuation that consumers place on the300th shirt, the 700th shirt, and the 1,200th shirt they mightbuy each year?b. With diminishing marginal utility, are consumers derivingany consumer surplus if the price is $25 per shirt? Explain.c. Use a market demand curve to illustrate the change in consumersurplus if the price drops from $30 to $25.