Problem 1: Suppose two goods are perfect complements and the price of good x increases. (a) Draw indifference curves and budget lines to show the initial and new equilibrium. (12) (b) What is the total effect resulting from the price increase of good x? (c) What is the income effect resulting from the price increase of good x?
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Intermediate
Problem 1: Suppose two goods are perfect complements and the
(c) What is the income effect resulting from the price increase of good x?
(d) What is the substitution effect resulting from the price increase of x?
(e) Provide an intuitive explanation for your answers in (b)-(d).
(f) Sketch the consumer’s Marshallian demand curve for good x. Label clearly the points
that you used in deriving your graph and label this curve Dm.
Please answer all the questions. Thanks in Advance.
Step by step
Solved in 3 steps with 1 images
- Question 4 With the prices of commodities A, B and C equal, which of the following should a consumer do to maximize her utility? Regard these commodities as providing equal satisfaction value Buy these commodities in the quantities needed to make their marginal utilities equal. Buy quantities of each which make total utilities equal. Divide her budget equally among these commodities. None of the suggested options.Course: Introduction to Microeconomics1. Our students Francisca and Javier have a heated discussion about Axioms of Preference and Rational Consumer Choice, from which they raise questions and reflections regarding topics seen in class. You are asked to comment on each of these statements, justifying whether statement is true, false or uncertain. You should be supported by graphic analysis as appropriate.Statements that our students arrive at are as follows:(a) To have consistent ordering and represent convex indifference curves, only Axioms of order (Monotonicity) and Transitivity are needed.b) For a consumer to find equally preferred baskets from an initial basket, he must establish a substitution relationship between goods to stay on same indifference curve.c) Given consumer's income, the best he can do with respect to his consumption decision, is to find a situation where marginal utility per weight spent on good X is equal to marginal utility per weight spent on good Y.Question 7 Suppose that a decrease in the price of good X results in fewer units of good Y being demanded. This implies that X and Y are Group of answer choices inferior goods. normal goods. complementary goods. substitute goods.
- Question 17 Marginal utility is the: sensitivity of consumer purchases of a good to changes in the price of that good. change in total utility obtained by consuming one more unit of a good. change in total utility obtained by consuming another unit of a good divided by the change in the price of that good. total utility associated with the consumption of a certain number of units of a good divided by the number of units consumed.1. Business managers are guided in their decisions by consumers' behavior regarding products relative to changes in their prices. However, regardless of whether the products are normal or inferior, the demand curves faced by business managers slope downward. Why? Illustrate. 2. Enumerate and explain the properties of Consumer Preference. 3. Illustrate and explain the Utility MaximizationCourse: Introduction to Microeconomics Topic: Consumer Theory and Preferences You are asked to comment on each of following statements, justifying whether statement is true, false or uncertain. You should be supported by graphical analysis as appropriate.Statements that our students arrive at are as follows:(a) To have a consistent ordering and represent convex indifference curves, ONLY axioms of ORDER and TRANSITIVITY are needed, omitting others.b) For a consumer to find baskets that are equally preferred from an initial basket, he must establish a substitution relationship between goods to stay on same indifference curve.c) Given a consumer's income, best that can be done for Consumption Decision is to find a situation where marginal utility per weight spent on good "X" is equal to marginal utility per weight spent on good "Y".
- 14) An Indifference curve slope down towards right since more of one commodity and less of another result in which of the following? A) Decreasing expenditure B) Maximum satisfaction C) Greater satisfaction D) Same satisfaction1. A consumer consumes two kinds of goods, namely X and Y. The total satisfaction (TU) obtained in consuming both kinds of goods is shown in the equation; (Unit of money in thousands of dollars).TU = 10X + 24Y - 0.5X2 - 0.5Y2TU is the total satisfaction in consuming goods X and YX is the number of items X consumedY is the number of items Y consumedThe price of item X is known to be $ 2, the price of item Y is $ 6 and the budget available to buy item X and item Y is $ 44.Question:a. Determine how many goods X and the number of goods Y must be consumed so that the consumer gets maximum total satisfaction. Determine the total satisfaction that can be obtained from consuming item X and item Y.b. If the price of item X drops from $ 2 to $ 1, determine the quantity of item X and the number of items Y must consume to obtain maximum total satisfaction. Determine the total satisfaction that can be obtained from the consumption of item X and item Y. 2. A producer has a total cost function: TC =…8. Substitutes, complements, or unrelated? You work for a marketing firm that has just landed a contract with Run-of-the-Mills to help them promote three of their products: penguin patties, frizzles, and kipples. All of these products have been on the market for some time, but, to entice better sales, Run-of-the-Mills wants to try a new advertisement that will market two of the products that consumers will likely consume together. As a former economics student, you know that complements are typically consumed together while substitutes can take the place of other goods. Run-of-the-Mills provides your marketing firm with the following data: When the price of penguin patties decreases by 5%, the quantity of frizzles sold increases by 4% and the quantity of kipples sold decreases by 6%. Your job is to use the cross-price elasticity between penguin patties and the other goods to determine which goods your marketing firm should advertise together. Complete the first column of the…
- Description 1. Suppose the utility function for goods x and y is given by utility = U(x, y ) = xy + y. a. Calculate the uncompensated (Marshallian) demand functions for x and y, and describe how the demand curves for x and y are shifted by changes in I or the price of the other good. b. Calculate the expenditure function for x and y. c. Use the expenditure function calculated in part (b) to compute the compensated demand functions for goods x and y. Describe how the compensated demand curves for x and y are shifted by changes in income or by changes in the price of the other good.14- Macroeconomics is the branch of economics that studies________. a. the economy as a whole b. prices of individual goods c. none of these d. the way individual markets workScenario: You are about to be a freshman in college. Before starting classes you need a new device to assist you through your semester. You have the option to buy from a laptop, desktop computer, electronic tablet. Budget: $ 1,400 Question: What is considered in the respective image the laptop that was good for the need of the scenario and why ??? Conclusion / Summary
