1. Doreen is looking for a flat to rent in Brighton.a. In choosing a flat, she cares about two characteristics: the number of bedrooms (x),and the number of bathrooms (y). Her utility function is U(x,y) = min(x, 2y). She has£1000 to spent on rent per month. The rental price per bedroom in Brighton is £400,and the price per bathroom is £200. (For example, a flat with three bedrooms andtwo bathrooms would rent for £1600 per month.) How many bedrooms andbathrooms does Doreen choose to rent optimally?b. Doreen now needs to furnish her flat. She has £500 to spend. However, she wouldalso like to buy some clothes for her new job. The cost of furniture f is £50 per unitand the cost of clothing c is £20 per unit. Her utility function over furniture andclothing is U(f.c) = f0.3c0.7. How much does she spend in total on furniture, and onclothing?c. The local furniture shop runs a flash sale of 50% off, on all prices. How much doesDoreen now spend on furniture, and on clothing? Explain.d. Having rented and furnished a flat, and purchased clothing for her new job, Doreennow wants to treat herself to a nice restaurant meal. Her preferences over pizza pand vegan burgers v are given by the following utility function: U(p,v) = 2p + v.%3Di. What is her marginal utility from pizza?ii. What is her marginal utility from vegan burgers?iii. What is diminishing marginal utility? Does this utility function exhibitdiminishing marginal utility only in pizza, vegan burgers, both or neither?Explain why.

Given information U=min(X,2Y) X= Number of bedrooms Y=Number of bathrooms Total income=1000 Price of…

1. Doreen is looking for a flat to rent in Brighton. a. In choosing a flat, she cares about two characteristics: the number of bedrooms (x), and the number of bathrooms (y). Her utility function is U(x,y) = min(x, 2y). She has £1000 to spent on rent per month. The rental price per bedroom in Brighton is £400, and the price per bathroom is £200. (For example, a flat with three bedrooms and two bathrooms would rent for £1600 per month.) How many bedrooms and bathrooms does Doreen choose to rent optimally? b. Doreen now needs to furnish her flat. She has £500 to spend. However, she would also like to buy some clothes for her new job. The cost of furniture f is £50 per unit and the cost of clothing c is £20 per unit. Her utility function over furniture and clothing is U(f.c) = 0.3c0.7. How much does she spend in total on furniture, and on clothing? %3D c. The local furniture shop runs a flash sale of 50% off, on all prices. How much does Doreen now spend on furniture, and on clothing? Explain.

1. Doreen is looking for a flat to rent in Brighton. a. In choosing a flat, she cares about two characteristics: the number of bedrooms (x), and the number of bathrooms (y). Her utility function is U(x,y) = min(x, 2y). She has £1000 to spent on rent per month. The rental price per bedroom in Brighton is £400, and the price per bathroom is £200. (For example, a flat with three bedrooms and two bathrooms would rent for £1600 per month.) How many bedrooms and bathrooms does Doreen choose to rent optimally? b. Doreen now needs to furnish her flat. She has £500 to spend. However, she would also like to buy some clothes for her new job. The cost of furniture f is £50 per unit and the cost of clothing c is £20 per unit. Her utility function over furniture and clothing is U(f.c) = 0.3c0.7. How much does she spend in total on furniture, and on clothing? %3D c. The local furniture shop runs a flash sale of 50% off, on all prices. How much does Doreen now spend on furniture, and on clothing? Explain.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

EXERCISE 7 Aisha is considering how to allocate the next 6 hours of her free time. She could choose between leisure (L) and helping her neighbour with the house chores. If she decides to help her neighbour, she is going to get paid at £25 per hour, which she can then spend on her favourite pizza (P). Suppose the price of pizza is £12.50. Aisha's preferences for leisure and pizza are given by the following utility function: U(L, P) = 3L + P. (MU₁ = 3, MUp = 1). a) Write down Aisha's budget equation and draw the corresponding budget line. Clearly label the axes and calculate the coordinates of the points of intersection of the budget line with each axis. b) Calculate Aisha's marginal rate of substitution between leisure and pizza. Explain the concept of MRS and interpret the figure obtained. c) Find Aisha's optimal consumption bundle, both algebraically and graphically. Explain your reasoning. d) Would Aisha's optimal choice change if she could get a discount on her pizza purchases so…
Julio loves gardening. His favourite plants are tulips and hydrangeas. His utility function is ' u(t,h)= t +100h -h^2 where t is the number of tulipsin his garden and h is the number of hydrangeas in his garden. suppose he has a 500 square feet for his garden. each tulip takes up 1 square foot of space and each hydrangeas takes up 4 square feet. he gets both plants for free.If he wanted to maximize his utility, how many tulips should he plant, what about hydrangeas? b) if his yard was only 144 square feet, how many tulips would he plant? How many hydrangeas? C) In order to plant both tulips and hydrangeas, how big does his garden need to be. carfeully explain.
Max is very peculiar about his morning coffee routine. He likes to use exactly two spoons of coffee for every six ounces of water. This give him the following utility function: U = min(2Water, 6Cof fee), where Water (W) is measured in fluid ounces and Coffee (C) in spoons. (a) afford while utility-maximizing? How many spoons of coffee does he use in doing so? (b) If he spends exactly $2 on coffee every morning, how many 8 ounce cups of coffee can he How much utility does Max get from his morning cup/s of coffee?
Aisha is considering how to allocate the next 6 hours of her free time. She could choose between leisure (L) and helping her neighbour with the house chores. If she decides to help her neighbour, she is going to get paid at £25 per hour, which she can then spend on her favourite pizza (P). Suppose the price of pizza is £12.50. Aisha's preferences for leisure and pizza are given by the following utility function: U(L, P) = 3L + P. (MUL = 3, MUp = 1). a) Write down Aisha's budget equation and draw the corresponding budget line. Clearly label the axes and calculate the coordinates of the points of intersection of the budget line with each axis. b) Calculate Aisha's marginal rate of substitution between leisure and pizza. Explain the concept of MRS and interpret the figure obtained. c) Find Aisha's optimal consumption bundle, both algebraically and graphically. Explain your reasoning. d) Would Aisha's optimal choice change if she could get a discount on her pizza purchases so that each…
Aisha is considering how to allocate the next 6 hours of her free time. She could choose between leisure (L) and helping her neighbour with the house chores. If she decides to help her neighbour, she is going to get paid at £25 per hour, which she can then spend on her favourite pizza (P). Suppose the price of pizza is £12.50. Aisha's preferences for leisure and pizza are given by the following utility function: U (L, P) = 3L + P. (MUL = 3, MUp = 1). a) Write down Aisha's budget equation and draw the corresponding budget line. Clearly label the axes and calculate the coordinates of the points of intersection of the budget line with each axis. d) Would Aisha's optimal choice change if she could get a discount on her pizza purchases so that each pizza would cost £5? Explain. e) Would Aisha's optimal choice change (as compared to c), if she could get a discount on her pizza purchases so that each additional pizza beyond the first two, cost £5? (In other words, the first two pizzas need to…
4. Minnie enjoys dessert by eating chocolate cake (C) and apple pie (P) according to the utility function U = Min [C, P]. In any given week, Minnie %3D spends £20 to purchase these two products. Assume that Minnie is a utility maximiser and has to pay 50p for a unit of apple pie and £2 for a unit of chocolate cake. (i) Consider the bundle C = 20 and P = 5. Is this the utility maximizing choice subject to Minnie's budget?. %3! (ii) Suppose that Minnie chooses the exact bundle that maximizes her utility. How would the utility maximizing choice of C be affected if price of P went up? (iii) Explain under which conditions the tangency condition does not work. Given that the tangency condition does not work, discuss how we can find out the optimal consumption bundle for a consumer.
8. Pele enjoys coffee (C) and tea (T) according to the function Replace 'Pele' with Alana U(C, T) = 3C + 4T(a) What does her utility function say about her MRS of coffee and tea?(b) Suppose the price of coffee (PC) and the price of tea (PT) are both $3. If Alana has $12 to spend on these products,i. How much coffee and tea should she buy to maximize her utility? ii. Draw a carefully labeled graph of her indifference curve map and her budget constraint. Put the quantities of coffee on the horizontal axis. Be sure to identify the utility maximizing point.(c) Would Alana buy more coffee if she had more income? Explain. (d) Suppose the price of coffee fell to $2. How would her consumption change?
Aisha is considering how to allocate the next 6 hours of her free time. She could choose between leisure (L) and helping her neighbour with the house chores. If she decides to help her neighbour, she is going to get paid at £25 per hour, which she can then spend on her favourite pizza (P). Suppose the price of pizza is £12.50. Aisha’s preferences for leisure and pizza are given by the following utility function: . U(L,P)= 3L + P MU(L)= 3 MU(P)=1 Write down Aisha’s budget equation and draw the corresponding budget line. Clearly label the axes and calculate the coordinates of the points of intersection of the budget line with each axis. Calculate Aisha’s marginal rate of substitution between leisure and pizza. Explain the concept of MRS and interpret the figure obtained. Find Aisha’s optimal consumption bundle, both algebraically and graphically. Explain your reasoning. Would Aisha’s optimal choice change if she could get a discount on her pizza purchases so that each pizza would cost…
What is meant by form utility?
You have $4,000 to spend on entertainment this year (lucky you!). The price of a day trip (T) is $40 and theprice of a pizza and a movie (M) is $20. Suppose that your utility function is U(T, M) = T3/4M1/4.a. What combination of T and M will you choose? b. Suppose that the price of day trips rises to $50. How will this change your decision?
You have $3,000 to spend on entertainment this year (lucky you!). The price of a day trip (T) is $40 and the price of a pizza and a movie (M) is $20. Suppose that your utility function is U(TM) T1/3M2/3. a. What combination of T and M will you choose? b. Suppose that the price of day trips rises to $50. How will this change your decision?
1. Muhammad enjoys going to the aquarium (x) and playing basketball (y). His preferences on x and y are described by his utility function: U(x, y) = 100x23y3. He has a budget of £120 per week to spend on playing basketball and going to the acquarium. Knowing that p,=10 and py=10: ,2/3,1/3 (A) Find the optimal combination of x and y so that Muhammad maximizes his utility subject to the budget constraint. Show this graphically. (B) Consider now that the price of going to the aquarium increases to £20, the price of playing basketball is now £15 and the income did not change. How does this modify Muhammad's optimal bundle? Show this graphically. (C) Compare the optima in (A) and (B): has the valuation of y in terms of x changed? Explain.