How did the '50' in the utility function influence the optimal con- sumption bundle? How did the '10' in the utility function influence the optimal consumption bundle? (i.e., how would the optimal bun- dle change if these coefficients were to change?). How would the optimal bundle change if the utility function was xžx2? Lastly, how

How did the '50' in the utility function influence the optimal con- sumption bundle? How did the '10' in the utility function influence the optimal consumption bundle? (i.e., how would the optimal bun- dle change if these coefficients were to change?). How would the optimal bundle change if the utility function was xžx2? Lastly, how

Principles of Economics (MindTap Course List)

8th Edition

ISBN:9781305585126

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter21: The Theory Of Consumer Choice

Section: Chapter Questions

Problem 1PA

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For this question, assume that indifference curves are strictly convex, consumption andleisure are normal goods, and the optimal amounts of consumption, leisure, and labor arealways positive. A wage increase ______. (SE = substitution effect; IE = income effect)(a) increases labor supply via the SE and decreases labor supply via the IE(b) decreases labor supply via the SE and decreases labor supply via the IE(c) increases labor supply via the SE and increases labor supply via the IE(d) decreases labor supply via the SE and increases labor supply via the IE(e) Can’t tell without knowing the utility function
Mrs. Rochester earns $4500 a week and spends her entire income on computers andpastries, since these are the only two items that provide her utility. Furthermore, a) Draw an indifference curve showing the optimum choice. Label the optimum aspoint A. What would be the marginal rate of substitution at the point thatcorresponds to the optimal consumption choice? Interpret the marginal rate ofsubstitution. b) What would be the new marginal rate of substitution that corresponds to theoptimal consumption choice? Interpret the marginal rate of substitution. c) Assume for this question only that when the price of computers decreases, less ofthat good is demanded. Illustrate the income and substitution effect of this pricedecrease.
Two friends are discussing their plans for the month.One works at a movie theater and gets 10 free movietickets; the other works at a concert venue and gets10 free concert tickets. What can we predict about thefirst person’s marginal rate of substitution betweenmovies and concerts? What can we predict aboutthe second person’s marginal rate of substitutionbetween the two? How does this relate to the slopeof each of their indifference curves?
Pls help me with this homework : Given the following leisure-income bundles, use the chord method to calculate the marginal rate of substitution (MRS) and make sure to use a graph in answering this question, given that the marginal utility of income (MUY) and marginal utility of leisure (MUL) are 4 and 40 respectively : Bundle A: 4 hours of leisure, income equals N$200, utility equals 200 utils; Bundle B: 4 hours of leisure, income equals RI00, utility equals 100 utils; Bundle C: 7 hours of leisure, income equals N$100, utility equals 200 utils. Thank You !!
Utility function U(X,Y)=(x^(3/4))(Y^(1/4)) 1)Suppose Px=2, Py=1, and Income is 100. What are the new levels of demand for X and Y? 2) Digrammatically show the income and substitution effect from 3 to 2 on the consumption of x. You must explicitly specify the optimal consumption bundles for the different sets of prices (appropriatly graph and label actual quantities) but you may qualitatively specify anything else deemed relevant. 3)Which effect (substitution or income) will move you along a given indifference curve? And for this question, do you move to the left or right along the given indifference curve and does this increase of decrese MRS. Also, explicitly specify what the MRS is equal to before and after you move along the indiferrence curve.
Consider a person with the utility function U (C, L) = (1 − α) log C + α log L, where L is leisure time and C is consumption of other goods measured in dollars. The person has V dollars of non-labor income and a wage of w. There are T hours available for either working or leisure. 1. Write down the person’s budget constraint. Draw a graph representing this constraint, taking care to label the axes and key points. 2. What are the person’s marginal utilities for consumption and leisure? What is her marginal rate of substitution between leisure and consumption in terms of C, L, and α? 3. Write down a condition involving the person’s marginal rate of substitution that characterizes her optimal choice. Represent this condition graphically and interpret in words. 4. Solve for the person’s optimal choices of leisure and consumption, L ∗ and C ∗ , in terms of T, V , w, and α. 5. How does L ∗ change as you increase wage w and non-labor income V ? 6. How does C ∗ change as you increase wage…