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What would the Engel curve look like for each of the following three types of goods? Necessary, Luxury, Giffen.
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- Suppose pizza(P) and hamburger(H) are perfect substitutes for Andy. He is always willing to substitute two pizzas for one hamburge(b) The price of pizza is pP = $2 per pizza and the price of hamburger is pH = $2 per hamburger.What is Andy’s optimal consumption bundle if his income level is $30?(c) To promote the sale of pizza, now the owner of the pizza restaurant decides to give out the first two pizzas to every consumer for free, and af- terwards, if the consumer wants more, the consumer will still pay at the price of pP = $2 per pizza. If the price of hamburger and Andy’s income are same as before,draw Andy’s budget line. What is Andy’s optimal con- sumption bundle in this case?(d) Now,to promote the sale of pizza, instead of giving out the first two pizzas for free, the owner of the pizza restaurant decides to lower the price of pizza to $0.8 per pizza. Given price of hamburger and Andy’s income remain the same as before, what is Andy’s optimal consumption budle now? Compare with…Please draw the income-consumption (or income-offer) curve for each of the following utility functions, indicating the slope of each: (a) U = (A)(x^a)(y^b) (b) U = min(ax, by) (c) U = ax + bySuppose buyers are affected when a new tax on soda is introduced to curb obesity. What action do the sellers take when there is a reduction in the soda tax? Demonstrate the change in the graph below by shifting the appropriate curve.
- I need help with this question in my homework. Suppose a consumer’s utility function is given by U(X,Y) = MIN (5X, Y). Also, the consumer has $60 to spend, and the price of good X is P(x) = $5. Let good Y be a composite good (good Y is the “numeraire”) whose price is P(y) = $1. So, on the Y-axis, we are graphing the amount of money that the consumer has available to spend on all other goods for any given value of X. What is the Indirect Utility Function? What is the Expenditure Function?Student question Time Left : 00:09:39 5) Quasimodo consumes earplugs and other things. His utility function for earplugs x and money to spend on other goods y is given by ux,y=100x-x22+y What kind of utility function does Quasimodo have? What is his inverse demand curve for earplugs? (Implicitly, the price of money left over for other goods is 1) If the price of earplugs is $50, how many earplugs will he consume? If the price of earplugs is $80, how many earplugs will he consume? Suppose that Quasimodo has $4,000 in total to spend a month. What is his total utility for earplugs and money to spend on other things if the price of earplugs is $50? What is his total utility for earplugs and other things if the price of earplugs is $80? How much does the utility decrease when the price changes from $50 to $80?Maude considers roses and tulips to be perfect substitutes. She spends $20 on these flowers Initially the price of roses is $1 and the price of tulips is $2. Then the price of roses changes to $3. Calculate the total change in demand for tulips. How large is the income effect? How large is the substitution effect? Now assume that Maude’s original income of $20 resulted from an initial endowment of 20 roses. What is the endowment income effect on the demand for tulips of the increase in the price of roses to $3?
- Jason has the following utility function: U = F2C where F is food and C is clothing. Clothing is measured on the vertical axis while food is measured on the horizontal one. Suppose the price of food is €3 per unit, the price of clothing is €2 per unit and that Jason’s income is €36. Calculate the number of units of clothing that Jason consumes in equilibrium. Mary has a different utility function than Jason in Question 2 but faces the same prices as him. Suppose she also only consumes food and clothing but we do not know her utility function or her income. What is Mary’s marginal rate of substitution of food for clothing when her utility is maximized? Explain your answer briefly.Granny lives in the Woods and consumes only bread and fruits. One week she falls ill and has to ask her niece, Red, to buy her weekly food. Red lives in the City, where the price of fruit is $ 2 per kilogram and the price of bread is also $ 2 per loaf. Red knows that Granny's utility function is given by U(f, b) = In (f) + 2 In (b) and that Granny has allocated $ 60 of her income for food each week. Heading to Granny's house in the Woods with the food bought from the City in her basket, Red unexpectedly meets the infamous trader B. B. Wolf, which offers to buy or sell food at a price of $ 3per kilogram of fruits, and $ 6per loaf of bread. Show graphically, what is the Red's budget line before meeting with Wolf and the budghet line after meeting with Wolf?Consider the market for Netflix Subscriptions. Show graphically and explain using economic intuition, what happens to the market price and quantity in each of the following 3. Bruno can spend his income on two different goods: smoothies and energy bars. For each of the following three situations, decide if the given consumption bundle is within Bruno’s consumption possibilities. Then decide if it lies on the budget line or not. a) Smoothies cost $2 each, and energy bars cost $3 each. Bruno has income of $60. He is considering a consumption bundle containing 15 smoothies and 10 energy bars.b) Smoothies cost $2 each, and energy bars cost $5 each. Bruno has income of $110. He is considering a consumption bundle containing 20 smoothies and 10 energy bars. c) Smoothies cost $3 each, and energy bars cost $10 each. Bruno has income of $50. He is considering a consumption bundle containing 10 smoothies and 3 energy bars. 4. In each of the following situations, describe the substitution…
- Discuss how the utility-maximization model helps highlight the income and substitution effects of a price change.Carol needs to decide how to spend her wealth on fish and chicken. For Carol, 1 lb of fish is equivalent to 2 lb of chicken. Her preferences can be represented by the utility function u(x; y) = 2x + y where x is the quantity of fish (in lbs) and y is the quantity of chicken (in lbs). The consumption set is R2+. a) Suppose now that the price of fish increases to $2 per pound. Draw Carol's budget set, labeling the slope and the intercept points clearly. How much fish and chicken will Carol choose to purchase? b) Suppose that Carol goes to a different supermarket where the price of fish is Px > 0 (in dollars per pound of fish) and the price of chicken is Py > 0 (in dollars per pound of chicken). Find Carol's demand for fish as a function of the prices Px and Py . You can assume that she still has $20 to spend. Assume that the price of chicken is Py = 1. Draw Carol's demand function for fish as a function of the price of fish (Px) in a diagram with the quantity of fish on the…Consider a utility function l(X_{A}, X_{B}) = X_{A}*X_{B} Let P_{A} =\$3 and P_{B} =\$2. and income is set at M =\$40. Suppose P_{B} falls to P_{B}' = 1 1. Before the price change, what was x_{A} ^ * and x B^ * the optimal consumption bundles? Sketch the original budget line and label the point ( x_{A} ^ * ,x B ^ * ) as A. Let x_{A} be on the horizontal axis. 2. If, after the price change, income changed so that the original optimal bundle is just as affordable. What is the new income, m' ? At (p_{A}, p_{B}', m') what is the new optimal bundle (x_{A}', x_{B}')' Sketch the budget line associated with p_{A}, p_{B}', m' ) . Label the point (x_{A}', x_{B}') as B. 3. Does the substitution effect result in more x_{B} ? How many more or fewer? 4. After the price change, how much x_{A} and x_{B} are actually bought. ( x_{A} ^ prime prime ,x B ^ prime prime )? Sketch the budget line associated with (p_{A}, p_{B}', m) Label the point x_{4} ^ prime prime , x_{R} ^ prime prime ) as C. 5.…