For the Utility function and demand functions: .0.5 U(x,y) = x05 +y I x(px, Py, 1) = y(px, Py, I) = ,0.5 Px(1+PxPy¹) I Px(1+px ¹py) 1. Calculate the elasticities of the Marshallian demand function for good 1.
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![For the Utility function and demand functions:
U(x, y) = x0.5 + y0.5
I
x(PxPy, 1)
=
y (Px, Py, 1):
=
Px(1 +PxPỹ¹)
I
-1
Px(1+px ¹py)
1. Calculate the elasticities of the Marshallian demand function
for good 1.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F60254034-d9ae-4b5e-8856-d5a55f3165ba%2F9fbd7dbf-6a87-4e28-9a3e-5e51436cd36f%2Fnwii0fq_processed.jpeg&w=3840&q=75)
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- Suppose the income elasticity of demand for food is 0.45 and the price elasticity of demand is 1.00. Suppose also that Felicia spends $10,000 a year on food, the price of food is $2, and that her income is $ 25,000. If a sales tax on food caused the price of food to increase to $2.50, what would happen to her consumption of food? Because a large price change is involved, use the arc elasticity to measure the price elasticity of demand rather than a point elasticity. Felicia's consumption of food would decrease by units. ( Enter your response rounded to two decimal places.) Suppose that Felicia gets a tax rebate of $2,500 to ease the effect of the sales tax. What would her consumption of food be now? (Again, use an arc income elasticity to answer this question instead of a point income elasticity.) Felicia's consumption of food would now be 4,175.18 units. (Enter your response rounded to two decimal places.) Is she better or worse off when given a rebate equal to the sales tax payments?…Suppose the income elasticity of demand for food is 0.45 and the price elasticity of demand is - 1.00. Suppose also that Felicia spends $10,000 a year on food, the price of food is $2, and that her income is $25,000. If a sales tax on food caused the price of food to increase to $2.50, what would happen to her consumption of food? Because a large price change is involved, use the arc elasticity to measure the price elasticity of demand rather than a point elasticity. Felicia's consumption of food would decrease by 1000.00 units. (Enter your response rounded to two decimal places.) Suppose that Felicia gets a tax rebate of $2,500 to ease the effect of the sales tax. What would her consumption of food be now? (Again, use an arc income elasticity to answer this question instead of a point income elasticity.) Felicia's consumption of food would now be 4,175.18 units. (Enter your response rounded to two decimal places.) Is she better or worse off when given a rebate equal to the sales tax…. Economists often say that goods tend to have more elastic demand when they have lots of close χδ = α + (1 - a) substitutes. Use the CES utility function U(x, y) to show that the own-price elasticity of demand for good X gets larger (in absolute value) as the elasticity of substitution gets larger.
- a) A consumer has a utility function given by U = x025 y0.75 He has an income of £100, the price of good x is £5 and the price of good y is £10. How much of the 2 goods x and y does the consumer buy? Take a picture of your workings and upload with your answer, or type out your workings. b) For the utility function above, what is the cross-price elasticity of demand for good x with respect to the price of good y? Take a picture of your workings and upload with your answer, or type out your workings. c) For the utility function above, what is the elasticity of demand of good x with respect to its own price? Take a picture of your workings and upload with your answer, or type out your workings.If a household’s marginal utility from some good falls very rapidly as it consumes more of it, is the price elasticity of its demand for the good likely to be high or low?What is the sum of the own price elasticity of demand for X, the cross price elasticities, and the income elasticity of demand for X? Does this hold only for the given type of utility function or all well behaved utility functions? What does this mean?
- If the utility function for a consumer is defined by U=6X^3/5Y^2/5 Given that the consumer's income is 300 currency units and unit price of goods X and Y are 12 and 15 currency units respectively, calculate the equilibrium quantity of both goods. Compute the price elasticity of demand for both goods and interpret your results. If income and prices of the two goods increase by 50%, calculate the equilibrium quantities of both goodsConsider the following. Demand Function Quantity Demanded p = 500 3x X = 16 Find the price elasticity of demand for the demand function at the indicated x-value. Is the demand elastic, inelastic, or of unit elasticity at the indicated x-value? The demand is elastic at this x-value. The demand is inelastic at this x-value. O The demand is of unit elasticity at this x-value. Use a graphing utility to graph the revenue function. y y 600 1200 500 1000 400 800 300 600 200 400 WebAssign Plot 100 200 X X 50 100 150 50 100 150 y y 25 000 12 000 10 000 20 000 8000 15 000 6000 10 000 4000 5000 2000Consider the demand functionQd = 1000 − 4P2+ 6P*+ 5Ywhich describes how the demand Qdfor a good depends on its price P, the price P* of another good and income Y. Calculate the own-price elasticity, cross price elasticity and income elasticity when P = 10, P* = 20 and Y = 1000. Is demand elastic or inelastic? Are the good complements or substitutes? Is demand normal?
- Consumers view cake as an irreplaceable staple of any birthday party. Consumers also like to serve either cookies, ice cream, or donuts at birthday parties, but they don't need all three of those desserts as much as they need the cake. Assuming this is the only difference between these products, the price elasticity of demand for cake will be Response area the price elasticity of demand for ice cream. Is it greater than, less than, or equal too?Assume that the income elasticity of demand for hot dogs is - 1.25 and that the income elasticity of demand for lobster is 1.25. What will happen to each good's demand curve as income goes up?Consider the demand for a luxury good such as a yacht. You can plot three different straight lines through the three points X, Y, and Z on this graph. Place the blue line (circle symbol) so that it goes through two of the points and shows the most likely demand curve for this type of good. Hint: Consider the relative elasticities of the different possible demand curves. 120 100 Demand Curve メ) 60 メャ メマ 40 20 0. 2. 4. 6. 8 10 12 LUXURY GOODS (Thousands per year) 14 16 PRICE (Dollars per yacht)
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