) Kuzey is a writer. He consumes only paper and pencils. Given his income, he chooses to consume 10 sheets of paper and 2 pencils. The price of a sheet of paper is 1YTL and the price of a pencil is 5YTL. His friend Güney comes up with two trade offers to Kuzey: In scenario 1, he offers Kuzey 1 pencil in return for 5 sheets of paper. In scenario 2, he offers 6 sheets of paper in return for 1 pencil. How

) Kuzey is a writer. He consumes only paper and pencils. Given his income, he chooses to consume 10 sheets of paper and 2 pencils. The price of a sheet of paper is 1YTL and the price of a pencil is 5YTL. His friend Güney comes up with two trade offers to Kuzey: In scenario 1, he offers Kuzey 1 pencil in return for 5 sheets of paper. In scenario 2, he offers 6 sheets of paper in return for 1 pencil. How

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter21: The Theory Of Consumer Choice

Section: Chapter Questions

Problem 5CQQ

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Similar questions

Who determines how much utility an individual will receive from consuming a good?
Would you expect total utility to rise or fall with additional consumption of a good? Why?
Explain all the reasons why a decrease in a products price would lead to an increase in purchases.
The rules of politics are not always the same as the rules of economics. In discussions of setting budgets for government agencies, there is a strategy called closing the Washington Monument. When an agency faces the unwelcome prospect of a budget cut, it may decide to close a high-visibility attraction enjoyed by many people (like the Washington Monument). Explain in terms of diminishing marginal utility why the Washington Monument strategy is So misleading. Hint: If you are really trying to make the best of a budget cut, should you cut the items in your budget with tile highest marginal utility or line lowest marginal utility? Does the Washington Monument strategy cut the items with the highest marginal utility or line lowest marginal utility?
Income Effects depend on the income elasticity of demand for each good limit you buy. If one of the goods you buy has a negative income elasticity, that is, it is an inferior good, what must be true of the income elasticity of the other good you buy?
If people do not have a complete mental picture of total utility for every level of consumption, how can they find their utility-maximizing consumption choice?
4. URGENT Given that maximize utility of two goods, x and y, is where MUx/Px=MUy/Py MUx/MUy=Px/Py , where MU is marginal utility, and P is price. a. Explain what happens to the marginal utility of x, when more of x is consumed. b. Explain what a rational person should do when MUx/Px>MUy/Py , and how each MU, and MU/P changes or not. c. Graph and explain the intercepts and the slope of the budget line (constraint) when the budget is 100 and the price of x is 5 and the price of y is 4. d. Graph and explain an indifference curve that is tangent to a budget line. This is a general graph with no numbers.
5. Consider a consumer whose utility function isu(x,y) = sqrt(xy) (MRS(x,y)=y/x)a. Assume the consumer has income $120 and initially faces the prices px = $1 and py = $1. Howmuch x and y would they buy? Draw the budget constraint and the demands. b. Next, suppose the price of x were to increase to $2. How much would they buy now? Draw thisin the same figure.c. Decompose the total effect of the price change on demand for x into the substitution effect and theincome effect. That is, determine precisely how much of the change is due to each of thecomponent effects. (Hint: See the lecture notes for the two properties that determine the locationof “z”, the reference point for distinguishing the income and substitution effects.)
4. Sompa consumes two goods (x and y) with a total income of GHS 20 and the price of the two goods are GHS 4.00 and GHS 5.00 for commodity X and Y respectively.a. Write down the equation of the budget lineb. What is the slope of the budget line?c. How does the budget line change if the consumer income increases to GHS 40 but prices remain unchanged?d. What happens to the budget line if the price of good y decreases to 3 whiles the price of good x and income remain unchanged?e. What happens to the budget line if price of good x increases to 7 whiles the price of good x and income remain unchanged?f. How much of good x can Sompa consume if she spends her entire income on that good?g. How much of good y can Sompa consume if she spends her entire income on that good?5. With the aid of a diagram analyse the income, substitution and total effect of a price change on the following type of goods. a. Normal goods b. Inferior goods c. Giffen goods
5. A consumer buys only two goods, X and Y. No other goods exist and there is no possibility of saving. The marginal utility of X is independent of the quantity of Y consumed, and the marginal utility of Y is independent of the quantity of X consumed. MUX is constant no matter how he consumes, but MUY falls as consumption increases. In the initial equilibrium he consumes one of each good. How much can you infer about the following:a.) The slope of the indifference curveb.) The curvature of the indifference curvec.) Whether the marginal utility of money is constant, rising, or falling as money income increases.d.) the income elasticity of demand for Ye.) The price elasticity of demand for X.
Columns 1 through 4 in the following table show the marginal utility, measured in utils, that Ricardo would get by purchasing various amounts of products A, B, C, and D. Column 5 shows the marginal utility Ricardo gets from saving. Assume that the prices of A, B, C, and D are, respectively, $18, $6, $4, and $24 and that Ricardo has an income of $106. a. What quantities of A, B, C, and D will Ricardo purchase in maximizing his utility? b. How many dollars will Ricardo choose to save? c. Check your answers by substituting them into the algebraic statement of the utility-maximizing rule.
Only typed answer and don't use chat gpt and don't answer in table 2. Charlie consumes apples (A) and bananas (B). His utility function is . The price of apples is $1, the price of bananas is $2, and Charlie’s income is $40. The price of bananas suddenly falls to $1. (a) Before the price change, how many apples and bananas did Charlie consume? (b) After the price change, how many apples and bananas did Charlie consume? (c) If after the price change, Charlie’s income had changed so that he could only attain his original level of utility, how many apples and bananas would he have consumed? (d) What are the magnitudes of the price, substitution, and income effects for the consumption of bananas?