If a resource can be used to produce either Good A or Good B, then Good A and B are a) substitutes in production b) complements in production c) substitutes in consumption d) complements in consumption e) normal goods
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- If a producer can use resources to produce either good A or good B, then A and B areA) substitutes in consumption. B) complements in consumption. C) complements in production. D) substitutes in production.Pedro, a retired economics professor, grows lemons and oranges in his back- yard. He consumes some of these fruits, and sells some in a local farmer's market. Pedro's preferences are represented by the following utility function U(x, y) = min{x,y}. In one season he can harvest 20 pounds of lemons and 60 pounds of oranges. In the local market, price of lemons is $4 per pounds and price of oranges is $2 per pound. Pedro receives $300 income from his retirement plan per season. Question 1 Part a Find Pedro's optimal consumption bundle. Make sure to draw his budget con- straint and indifference curves to show his optimal choice. Question 1 Part b Suppose that the price of lemons rises to $5 per pound. What is Pedro's optimal consumption bundle now? Decompose the total change in demand due to a price change into a substitution effect, ordinary income effect and endowment income effect and graphically demonstrate it.When an allocation of resources maximizes total surplus, the result is said to be efficient. Click or tap "True" or "False" to answer the question. True False
- Individual that consumes two goods (X and Y) and has a CES Utility Function of the form: U = 100(X^(0.75) + Y^(0.75)). Income of 1000, the price of Good X is 10 and the Price of Good Y is 20 a) Find the Marginal Rate of Substitution as a function of the quantities consumed of Good X and Good Y. b) Write out the Lagrangian for this problem. c) Solve to find the demand for Good X, the demand for Good Y, and the highest level of utility for this individual. d) Now consider an increase in the price of Good X to 20. What is the demand for Good X and Good Y? What is the Utility of the consumer following the price change? e) Considering the change in demand for each good between parts c) and d), how much is due to the substitution effect and how much is due to the income effect? f) Show your answers on a graph.The demand function for a particular good is x = a + bp. What are the associated direct and indirect utility functions?When the price of one good affect the demand for another good, then the goods are likely to be .......................... a) substitute or compliment goods b) of the same price c) from different company d) of the same product
- When price of a pizza decreases from $12 to 10, it is definitely the case that the: A. Income effect means people buy less pizza. B. Substitution effect means people buy more pizza. C. Quantity demanded of pizza will not change. D. None of the above.When price of a pizza decreases from $12 to 10, it is definitely the case that the: A. Income effect means people buy less pizza. B. Substitution effect means people buy more pizza. C. Quantity demanded of pizza will not change.Good X and good Z have a constant marginal rate of substitution (MRS) of one. Draw the price-consumption curve when the price of good X changes. Explain your graph
- Person 1 can allocate her 8-hour day between the production of two goods: A and B. Each hour devoted to Good B yields 2 units whereas each hour devoted to Good A produces 4 units.Cinnamon Toast Crunch cereal and Trix cereal are considered substitute goods. Because of this, one would predict that, holding all else constant, if the price of Cinnamon Toast Crunch cereal increases, we would seeFind marginal utility for each consumption level for both products and please show your work in Table.
