Suppose the price of good x falls. As a result, the quantity demanded for good x increases for a particular consumer. For this consumer, the substitution effect induced the consumer to purchase more x while the income effect induced the consumer to purchase less x. We can infer that x is a Giffen good x is a normal good x is an inferior good x is a luxury good
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- Exercise 2. In order to encourage energy conservation, many public utility companies charge consumers a higher rate on units of electricity consumed in excess of some threshold amount. In contrast, a common practice by other firms is to offer “quantity discounts” to consumers who purchase large quantities of a good. Suppose income is $100, PX = $2 if theconsumer buys less than 40 units of X, and PY = $5.A. For the energy case, assume PX = $3 if the consumer buys more than 40 units of XB. For the “quantity discounts” case, assume PX = $1 after 40 units of X were consumed Draw the budget constraints in each of the cases above. What are the implications of the opportunity sets in terms of consumer behavior to consume each of the products?Bart and Lisa are both optimizing consumers in the market for shirts and hats, where they pay $100 for a shirt and $50 for a hat. Bart buys 8 shirts and 4 hats, while Lisa buys 6 shirts and 12 hats. From this information, ignoring the minus sign, we can infer that Bart's marginal rate of substiution is _________ hats per shirt, while Lisa's is __________ hat's per shirtVilfredo has complete and transitive preferences on cars. We know that he prefers a Hyundai Sonata to a Mazda 3, and that he finds a Mazda 3 at least as good as a Honda Civic. Can we conclude that he prefers a Hyundai Sonata to a Honda Civic? Yes No
- Suppose X = R k + for some k ≥ 2, and we define x = (x1 , …, xk ) ≥ = (y1 , …, yk ) if x ≥ y; that is, if for each i = 1, …, k, xi ≥ yi . (This is known as the Pareto ordering on R k + ; it plays an important role in the context of social choice theory in Chapter 8.) (a) Show that ≥ is transitive but not complete. (b) Characterize ≥ Is asymmetric? Is≥ Negatively transitive? Prove your assertions. (c) Characterize ~ defined from ≥ in the usual fashion; that is, x ~ y if x ≥ y and y x. Is ~ reflexive? Symmetric? Transitive? Prove your assertions.Brit-Brick is a company that produces bricks and cement in the UK. Their largest consumer is ConstrUK, a UK construction company. The manager of Brit-Brick has asked the research department to find out how sensitive ConstrUK’s demand for bricks is. The research department has estimated that ConstrUK’s preferences over bricks (x) and cement (y) can be described by the utility function U(x,y) = x4/5y1/5 where x and y are measured in bags. The price for one bag of cement is equal to £1. It is estimated that ConstrUK’s budget is £10,000. Find the price-consumption curve for bricks and the corresponding demand curve. Note: The writing is clear and abbreviations are not allowed.f we observe a consumer choosing (x1, x2) when (y1, y2) is available one time, are we justified in concluding that (x1, x2) (y1, y2)?
- Brit-Brick is a company that produces bricks and cement in the UK. Their largest consumer is ConstrUK, a UK construction company. The manager of Brit-Brick has asked the research department to find out how sensitive ConstrUK’s demand for bricks is. The research department has estimated that ConstrUK’s preferences over bricks (x) and cement (y) can be described by the utility function U(x,y)=xb/10y1-b/10 where b is 2, and where x and y are measured in bags. Example: if b=4, then . U(x,y)=x4/10y1-4/10=x2/5y3/5 The price for one bag of cement is equal to £1. It is estimated that ConstrUK’s budget is £10,000. Find the price-consumption curve for bricks and the corresponding demand curve.If we observe a consumer choosing (x1, x2) when (y1, y2) is available onetime, are we justified in concluding that (x1, x2) (y1, y2)?UniQ is a company that produces speaker HF drivers and woofers in the UK. Their largest consumer is KEF, a UK loudspeaker manufacturing company. The manager of KEF has asked the research department to find out how sensitive KEF’s demand for HF driver is. The research department has estimated that KEF’s preferences over HF drivers(x) and woofers(y) can be described by the utility function U(x,y) = x^1/2 y^1/2 The price for one unit of woofer is equal to £1. It is estimated that KEF’s budget is £10,000. Find the price-consumption curve for HF drivers and the corresponding demand curve.
- Suppose that each week Fiona buys 16 peaches and 4 apples at her local farmer's market. Both kinds of fruit cost $1 each. From this we can infer that: If Fiona is maximizing her utility, then her marginal utility from the 16th peach she buys must be greater than her marginal utility from the 4th apple she buys. Fiona is not maximizing her utility. If Fiona is maximizing her utility, then her marginal utility from the 16th peach she buys must be equal to her marginal utility from the 4th apple she buys. The law of diminishing marginal utility does not hold for Fiona.please review the second question about pareto efficeincyBrit-Brick is a company that produces bricks and cement in the UK. Their largest consumer is ConstrUK, a UK construction company. The manager of Brit-Brick has asked the research department to find out how sensitive ConstrUK’s demand for bricks is. The research department has estimated that ConstrUK’s preferences over bricks (x) and cement (y) can be described by the utility function U(x,y) = x2/10y1-2/10 The price for one bag of cement is equal to £1. It is estimated that ConstrUK’s budget is £10,000. Find the price-consumption curve for bricks and the corresponding demand curve.