Justin's demand for good 1 is given by the formula: x1d(p1,p2,I)=2⋅I/4⋅p1+6⋅p2, Suppose... p1=$7/unit p2=$7/unit and I=$266 By how much will Justin's consumption of good 1 change if all prices AND his income were to double? (When all prices and income increase by the same percent, as is the case here, this is called "pure inflation"). (Note: The numbers may change between questions, so read carefully) (Note: The answer may not be a whole number, so round to the nearest hundredth)
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4. Justin's demand for good 1 is given by the formula: x1d(p1,p2,I)=2⋅I/4⋅p1+6⋅p2, Suppose...
p1=$7/unit
p2=$7/unit
and
I=$266
By how much will Justin's consumption of good 1 change if all prices AND his income were to double? (When all prices and income increase by the same percent, as is the case here, this is called "pure inflation").
(Note: The numbers may change between questions, so read carefully)
(Note: The answer may not be a whole number, so round to the nearest hundredth)
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Solved in 4 steps
- Explain (in words, without using diagram) what would happen to the equilibrium consumption of two goods, X and Y, if: income doubled and all prices tripled, all prices doubled and income tripled, and all prices and income doubled. In each case, show the effects when both goods are normal goods and when one good is a normal good and the other an inferior good.12)Suppose a consumer has $100 to spend on two goods, shoes and shirts. If the price of a pair of shoes is $20 per pair and the price of a shirt is $15 each, which of the following combinations is unaffordable to the consumer? A) 0 pairs of shoes and 0 shirts B) 2 pairs of shoes and 4 shirts C) 5 pairs of shoes and 0 shirts D) 0 pairs of shoes and 7 shirts E) 2 pairs of shoes and 3 shirts14 : Assume that a consumer has a given budget or income of $10 and that she can buy only two goods, apples or bananas. The price of an apple is $2.00 and the price of a banana is $1.00. If the consumer decides to buy 4 apples, how many bananas can she also buy with the remainder of her budget, assuming she exhausts her income?
- For Jones, X and Y are perfect substitutes, and he is always willing to substitute 6 units of X for 2 units of Y. The price per unit of X is $5, and the price per unit of Y is $15. Jones’s income is $60. Compute the slope of Jones’s budget line and how many units of X does Jones consume? Suppose that the price of X increases to $10, and everything else remains the same. How many units of X does Jones consume? At which price does the demand curve of X become horizontally flat?1) Suppose that a person consumes two goods, x and y, in fixed proportions. He or she always consumes 1 unit of x together with 3 units of y no matter what the relative prices are.a) What is the mathematical form for this person's utility function?b) Calculate the Marshallian demand functions for both goods for this person.c) Calculate the indirect utility function and the expenditure function for this person.d) In class we discussed why expenditure functions are concave in prices. Is the expenditure function you calculated in part (c) concave in ???31) Suppose Joe's utility for lobster (L) and soda (S) can be represented as U = L0.5 S0.5. Joe walks into a restaurant with $72. Lobsters cost $18 each and sodas cost $2 each. How much lobster and soda will Joe consume if he intends to spend all his money? (There are no tax and no tips.) 1). dU/dL = 0.5 L-0.5 S0.5 - 18q = 0 2). dU/dL = 0.5 L0.5 S-0.5 - 2q = 0 3). dU/dq = 72 - 18L - 2S = 0 32) Joe's indifference map for lobster and soda is shown in the above figure along with his budget line. Will Joe choose point a? Explain your answer in terms both of MRS and the level of utility. 33) John is indifferent between canned soup and fresh soup. Canned soup sells for $1 per serving and fresh soup sells for $2 per serving. Assuming that John has allocated $4 toward soup, how will he spend it? Explain your answer by drawing John's budget line and indifference curves.
- 5) A consumer of two goods, good 1 and good 2, has a utility function u (X1, X2) = x1 0,6. X2 0,4, where x denotes units of good 1 and X2 units of good 2. The price of good 1 is 5 euros And the price of good 2 is 3 euros per unit and the consumer’s income is 150 euros. Suppose that only the price of good 1 changes and that the new price is p, ‘ = 2. Then the demand function of good 1 that is derived from the utility function is Choose one: A) X1= 0.6m/p1 B) X1= 6m/p1 C) X1= 4m/p1 D) X1= 0.4m/p1 E) Not defined6. When a good is normal:(a) An increase in income raises consumption at each price, so the demand curve shifts tothe left(b) An increase in income raises consumption at each price, so the demand curve shifts tothe right(c) A decrease in income lowers consumption at each price, so the demand curve shifts tothe right(d) An increase in income lowers consumption at each price, so the demand curve shiftsto the left.6. My utility over goods 1 and 2 is given by: u(x1,x2)=min{x1/a,x2/b} Where x1is the quantity of good 1 I consume and x2 is the quantity of good 2 I consume. Assuming I purchase only goods 1 and 2... If a = 2, b = 5, the price of good 1 is $2/unit, the price of good 2 if $7/unit and my income is $5, how much good 2 will I consume to maximize my utility? (Note: The answer may not be a whole number, so round your answer to the nearest hundredth) (Note: The numbers may change between questions, so read carefully)
- Kindly solve this with explanation Consider a 2-good economy and a consumer endowed with a positive net income m. If the unit prices of goods are p1 and p2 with p1=2p2 and the consumer is invariably indifferent between 5 units of the first good 1 and 8 units of the second good 2. Than the consumer will choose to consume amounts x1 of the first good and x2 of the second good such that; A) P1x1=p2x2 B) X=0, x2>0 C) X1>0, x2=0 D) None of the answers is correct7) Suppose that upon solving for optimal bundles of hamburgers and french fries, we determine that when the price of hamburgers is $5 and the price of fries is $2, that we consume 2 hamburgers and 5 orders of fries. Suppose further that, upon changing the price of fries to $4, we only consume 3 orders of fries. Draw out a demand curve for fries, labeling two points. This is not a trick question, this one is supposed to be easy.11) Assume Gloria is initially in equilibrium and that X and Y are normal goods for her. Then the price of X falls. For Gloria to move to a new equilibrium point her consumption ofA) X must decrease.B) X must remain constant, but her consumption of Y must decrease.C) X must increase.D) both X and Y must decrease.