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Explain how the consumer decides how many units of a good to consume by explaining the assumptions of the cardinal approach.
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- Explain the cardinal and ordinal utility approach ?Assume that, a consumer has $1200 to spend on two goods, X and Y. If the price of a pair of good X is $20 per unit and the price of good Y is $15 each, which of the following combinations that the consumer can purchase from good X and Good Y?Describe and graph your own example of a budget constraint using two goods (don’t forget to label your axes). In your example, make sure to state what the budget is, the price of the two goods, what the slope of the budget constraint equals (make sure to include the correct sign), and interpret what the slope represents.
- Inayah is a rational consumer who consumes milk and cookies only from her monthly income of Rs. 1,500. If the price of milk is Rs. 500 per liter and the price of one pack of cookie is Rs. 300, answer the following questions: Given the information above write the equation of the budget line and illustrate the same through the two-dimensional labeled diagram. If Inayah spends all of her income on consuming one good, find: how much cookies she could afford? how much milk she could consume? Identify the impact of an increase in the income from Rs. 1,500 to Rs. 1,800 on Inayah’s consumption level. Also illustrate it using the two-dimensional labeled diagram. Assume that Inayah’s consumption of milk and cookies give her following level of utility: Quantity MU milk MU cookies 1 400 450 2 350 200 3 200 150 4 100 100 5 70 60 6 30 30 7 0 0 Find the optimal level of consumption. Find the consumer…Using a budget line, why does a decrease in the price of a good allow one to potentially consume more of both goods?I need help with this question in my homework. Suppose a consumer’s utility function is given by U(X,Y) = MIN (5X, Y). Also, the consumer has $60 to spend, and the price of good X is P(x) = $5. Let good Y be a composite good (good Y is the “numeraire”) whose price is P(y) = $1. So, on the Y-axis, we are graphing the amount of money that the consumer has available to spend on all other goods for any given value of X. What is the Indirect Utility Function? What is the Expenditure Function?
- Carol has very weird preferences. She only cares about quantity. When evaluating a bundle, Carol only looks at the highest amount of a good she can consume in each bundle, regardless of whether it is of eggs or dumplings. She is indifferent between two bundles only when the largest consumption of a good within each bundle is the same across bundles. So, for instance, if a bundle offers 5 eggs and 1 dumpling she finds that bundle indifferent to a bundle offering 4 eggs and 5 dumplings. These preferences are transitive. But are they monotone? And convex?Inayah is a rational consumer who consumes milk and cookies only from her monthly income of Rs. 1,500. If the price of milk is Rs. 500 per liter and the price of one pack of cookie is Rs. 300, answer the following questions: a) Given the information above write the equation of the budget line and illustrate the same through the two-dimensional labeled diagram. b) If Inayah spends all of her income on consuming one good, find i. how much cookies she could afford? ii. how much milk she could consume? c) Identify the impact of an increase in the income from Rs. 1,500 to Rs. 1,800 on Inayah’s consumption level. Also illustrate it using the two-dimensional labeled diagram. d) Assume that Inayah’s consumption of milk and cookies give her following level of utility: Quantity MU milk MU cookies 1 400 450 2 350 200 3 200 150 4 100 100 5 70 60 6 30 30 7 0 0 i. Find the optimal level of consumption. ii. Find the consumer equilibrium using the two-dimensional labeled…When there is a calamity, the government provides help either in the form of food or cash. Which would most people prefer among these two? Illustrate and explain using indifference curves and budget lines. (put both indifference curves and and budget line in only one graph with the quantity of food in the x-axis and the quantity of other goods in the y-axis.
- John consumes 20 units of food and 24 units of clothing. If food is an inferior good, will John be indifferent between receiving a $24 gift certificate at a clothing store and receiving $24 in cash? Explain and show graphically.Let the following table represents the total utility of a given consumer, in the cardinal utility approach. Q 1 2 3 4 5 6 7 TUX 8 14 18 20 20 18 16 TUY 6 10 13 15 16 16 14 MUX MUY MUX/PX MUY/PY Calculate the MUX and MUY and fill the table in the 4th and 5th rows. If the two products (X&Y) are free goods how many of X and Y should the consumer take to maximize utility? What is the maximum utility of X and Y if they are free? Let now price of X is 4 birr per unit and price of Y is 2 birr per unit. Calculate MUX/PX and MUY/PY and fill the 6th and 7th row. Assuming the consumer has any amount of money (enough budget) how many of X and Y should the consumer buy, to maximize utility? What is the total utility of X and Y? Let now price of X is 4 birr per unit and price of Y is 2 birr per unit and budget of the consumer for consumption of X and Y is 20 birr. Given budget constraint how many of X and Y should the consumer buy to maximize utility?According to the law of diminishing marginal utility: a. as you consume less of something, your total utility will decrease. b. as you consume less of something, your marginal utility from consuming that good will increase c. you should never consume more of something if your marginal utility is decreasing. d. If your total utility is increasing as you consume more of something, then your marginal utility must be increasing as well.