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- 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?Take Jeremys total utility information in Exercise 6.1, and use the marginal utility approach to confirm the choice of phone minutes and round trips that maximize Jeremys utility.Utility functions of a consumer: U = 20x10.4x20.4 Specify:a. marginal utility of each item.b. If the consumption of x1seee is 80 and x2 as much as 60 units, the price of Px120 and Px2 25, Determine if there is a balance of consumption?
- Eren’s two main hobbies are taking vacations overseas (V) and eating expensive meals (M). His utility function is given as: U(V,M) = V^2MLast year, the average price of taking a vacation overseas was US$200 and the average price of an expensive meal is $50. However, due to supply problems in Onions, the average price of an expensive meal rose to $75. The average price of a vacation did not change. His income, which is $1500, did not change. Suppose that the Department of Welfare wants to know how much should be given to Eren to offset his change un utility due to the price increase of an expensive meal. Calculate the compensative variation (CV).E1 Suppose the Federal Government issues $100 worth of food stamps to everyone in your city. These stamps are coupons that can be exchanged for $100 worth of food at the grocery store and they can be used only by the person to whom they are issued. Draw your budgetline between “food’ and “all other goods” both before and after the food stamps are issued. Assume the price of food = price of “all other goods” = $1.00 and the individual’s initial income is $200.. Suppose that initially, bread is $2 per loaf,and cake is $2 per slice. Marie Antoinettehas $18 to spend on these items each week.At this income and those prices, Marie consumes 5 loaves of bread and 4 slices of cake.Then, the price of bread DECREASES to$1 per loaf. (The price of cake is still $2.)IF Marie’s budget had also fallen to $13so that she could still just afford her original bundle, she WOULD choose to spendthose $13 on 7 loaves of bread and 3 slicesof cake.But since Marie still has her original $18budget, she actually chooses to buy 4loaves of bread and 7 slices of cake afterthe price change.When the price of bread fell from $2 to $1,what was the substitution effect on Marie’sdemand for bread?
- Assume, as in Exercise 22.1, that a consumer has utility function F or fruit and chocolate. Determine the consumer's demand functions q1(P1, P2, M) and q2(P1, P2, M). Determine also It* in terms of P1, P2 and M. Find the indirect utility function and show that It* = 8Vj8M. Suppose, as before, that fruit costs $1 per unit and chocolate $2 per unit. If the income is raised from $36 to $36.5, determine the precise value of the resulting change in the indirect utility function. Show that this is approximately equal to (O.5)λ*, where λ* is evaluated at P1 = 1,P2 = 2 and M = 36. Exercise 22.1 A consumer purchases quantities of two commodities, fruit and chocolate, each month. The consumer's utility function is For a bundle (X1, X2) of X1 units of fruit and X2 units of chocolate. The consumer has a total of $49 to spend on fruit and chocolate each month. Fruit cost $1 per unit and chocolate costs $2 per unit. How many units of each should the consumer buy…Given an individual’s current consumption patterns, we know that the person is consuming in such a manner that he is maximizing his satisfaction. Given a decrease in the price of one of the goods he normally purchases, what will happen to the consumer’s total satisfaction and to the marginal utilities connected with the consumption of this particular good. a) His overall satisfaction will increase, but his satisfaction from the last unit consumed of the good with a decreased price will decrease. b) His overall satisfaction will decrease and his satisfaction from the last unit consumed of the good with a decreased price will decrease. c) His overall satisfaction will increase and his satisfaction from the last unit consumed of the good with a decreased price will increase. d) His overall satisfaction will decrease and his satisfaction from the last unit consumed of the good with a decreased price will increase. e) We cannot tell about the changes in his total utility or his marginal…Megan is a college student who consumes food and transportation. Last year, she consumed 90 meals and purchased 100 gallons of gasoline per month. Suppose that last year the price of a meal was $5 and the price of a gallon of gasoline was $2.23. However, this year, the price of a meal is $6 and the price of a gallon of gasoline is $3.92. As a result, Megan consumes 100 meals and 80 gallons of gasoline. For this example, assume Megan's utility this year is the same as her utility last year (and that her preferences have not changed). Calculate a Laspeyres cost-of-living index for Megan using 100 as the base for last year. In particular, the Laspeyres index for this year is nothing. (Enter your response rounded to two decimal places.)
- The following gives the marginal utility of John’s consumption of three goods A, B and C.Unit of consumption MUaMUbMUc1202545218203031615244141018512815610612 Goods A, Band C costs ksh2, ksh1 and ksh3 respectively. How many units of each good should a consumer take to maximize utility with an income of ksh12which is the most preferred level of individual’s choice for public expenditure relating it with individual’s utility dependence, by considering three different groups? also draw the graph and intrepret it.33. Suppose MRSx,y = MUx/MUy = 0.1(a) If the consumer substitutes 10 units of X for one unit of Y, then the utility remainsunchanged(b) Regardless of prices, the consumer will only consume Y(c) If the consumer substitutes 1 unit of Y for 0.1 unit of X, then the utility remainsunchanged(d) Regardless of prices, the consumer will only consume X