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[2nd_itemAB] *problem situation in the photo below*
Required:
- Which good(s) is(are) a substitute(s) for Good X?
- Which is(are) a complement(s)?
Step by step
Solved in 2 steps
- Suppose household annual demand for gasoline follows the equation QD = 2000 – 500P + 25I where P is the price of a gallon of gasoline and I is household income in 1000s of dollars. Suppose that P = 3 and I = 60. What quantity of gasoline will households demand at this price and income level?Q1: The demand for good X is given by Qx d = 6,000 − 1/2 Px − Py + 9 Pz + 1/10 M. Research shows that the prices of related goods are given by Py = $6,500 and Pz = $100, while the average income of individuals consuming this product is M = $80,000. a. How many units of good X will be purchased when Px = $5,230? The calculation should be handwrittenASAP according to helly only needed answer Q. 8. Suppose a consumer can afford to buy 6 units of good 1 and 8 units ofgood 2 if she spends her entire income. The prices of the two goods are ₹ 6 and₹ 8 respectively. How much is the consumer's income ?
- 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.Tom's income is 32. He consumes a single consumption good, C, which has a price of 2. His utility function depends on his marital status: when happily married, his utility is given byU=C^(1/2) When he is not married, his utility is given by U=0.5C^(1/2) a. Suppose that Tom is not currently married. What is his utility? Now suppose that Tom gets married.What is his utility? Assume Tom can spend all his income on his own consumption when he is married. b. Use compensating variation (CV) and equivalent variation (EV) to calculate the value of marriage to Tom. How do the two figures compare?2. Gorgeousleny purchased a combination of 15 breads and 5 juices with her income of P150 and price of bread is P6 and price of juice is P12. She proudly showed this to her mom, and to her dismay her mom said that she likes more juices than bread since its summer season. While on her way home she lost the receipt, but fortunately she can still receive store credit based from the total value of products. While approaching the customer service representative , she thought of this what if she sticks with her original plan of buying bread alone with no juice and vice versa. At the moment all juices in the store is 50% off. Draw the graph showing the budget constraints arise from endowments. a. ) Measure the qty. of bread on the vertical axis and the qty. of juice on the horizontal axis. Label both graph with its corresponding points, pt. A for bread and point B for juice. the combination of bread and juice label it as point C. b.) For both graph, What is the slope from point C…
- Problem 2 The demand-function for a given consumer good (A) is given as: ?_a=1400−4?_?−2?_?−0.005_? Where PA = 200 USD is the price for good A, PB = 50 USD is the price for good B, and I = 20,000 USD is the disposable income. Question 2.1 Provide examples of three more factors that influence demand of consumer good A, besides the ones presented in the equation above. Briefly explain why and how they would influence demand. Question 2.2. Find price point elasticity for good A and provide an economic interpretation. Question 2.3. Find cross price elasticity between goods A and B and provide an economic interpretation.John Q. Public spends all of his income on gasoline and hot dogs. Draw his budget line under several conditions: a. His income is $100, and one gallon of gasoline and one hot dog each cost $2. b. His income is $150, and the two prices remain the same. c. His income is $100, hot dogs cost $2 each, and gasoline costs $2.50 per gallon.A consumer has utility u(x,y) = x^4 y^2 where x is this year’s consumption, and y is next year’s consumption. She makes 600 dollars income this year and 720 dollars income the next year. There is also a bank where she can borrow money at the interest rate r=%50 and lend money (to the bank) at the interest rate r=%20 (of course, she will decide to borrow or lend this year and pay off her debt or receive her savings the next year). a. Should she borrow money from or lend to the bank this year? How much b. If her utility were u(x,y) = xy2 instead, re-solving (a), would she borrow money or lend? How much? c. If her utility were u(x,y) = x^c y^2, what should “c” be so that she ends up neither borrowing nor lending?
- 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).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?Suppose prices are Px = 2.5, Py = 5 and income is m = 215. The government taxes the consumer an extra $0.5 for each unit of xif she buys beyond 50 units. If the consumer spends all of her money on good x, how many goods x will the consumer get after tax (good x purchased after 50 units)?