If a parallel shift rightwards of the budget constraint makes the household work more, then which of the assumptions is violated: Households prefer more to less. Consumption and leisure are normal goods. None is being violated. O The consumer likes diversity in his or her consumption bundle.
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- If a consumer starts at point A, and then receives an income in current income, this would appear as an outward shift of the budget constraint. is it true or falseA consumer has an income of $400 and is deciding between two products: X and Y. Assume that the X product is the horizontal axis product. The price of X is $10 and the price of Y is $2. Assume the consumer currently wants to consume 50 units of product Y to maximize his utility. a) Write out the equation to this consumers budget line. What is the slope to this budget constraint? b) How much of X and Y will the consumer consume to maximize his utility subject to his budget constraint. C) Now assume the price of X changes to $5 and price of Y and Income stays the same. At the new price, the consumer wants to buy 60 units of product X to maximize her utility given her budget. How much X and Y will the consumer consume to maximize utility. g in the before and after the change of the budget constraint and indifference graph on the same graph space. Show all necessary points. Label clearly. ead oubstitutiofs. Draw d) Write out the expression of the utiiity maximizing ruie here.?A consumer has an income of $400 and is deciding between two products: X and Y. Assume that the X product is the horizontal axis product. The price of X is $10 and the price of Y is $2. Assume the consumer currently wants to consume 50 units of product Y to maximize his utility. a) Write out the equation to this consumers budget line. What is the slope to this budget constraint? b) How much of X and Y will the consumer consume to maximize his utility subject to his budget constraint. C) Now assume the price of X changes to $5 and price of Y and Income stays the same. At the new price, the consumer wants to buy 60 units of product X to maximize her utility given her budget How much X and Y will the consumer consume to maximize utility. S the before and after the change of the budget constraint and indifference gra on the same graph space. Show all necessary points. Label clearly. s. Draw d) Write out the expression of the utiity maximizing ruie here.?
- Suppose you are given the following information for a particular individualconsuming two goods, a and b: Pa = $5, Pb = $6, MUa = 100, MUb = 200, and income (m) = $200.a) Sketch the budget set. What is the slope of the Budget Line? What are maximal possibleconsumptions of a and b?b) What is the MRSab for the two goods?c) Is this person maximizing her utility? How can you tell?d) Should she consume more of good a or of b? Explain.e) Why can’t you tell what her optimal bundle is? Explain.Suppose we are able to model the total utility function for the consumption of two goods, good x and good z. The utility function is structured as U(x, z) = 3x2 + z2 - 2xz. The consumer is faced with the prices of goods x and z. The price for each unit of good x and z is $1 each. The consumer has an income $1 (in thousands). How many units of each good should the consumer consume so as to maximize his/her utility?Consider an indifference curve for someone deciding how to allocate time between work (and thus consumption) and leisure. Suppose the wage increases. An increase in the wage rate results in a substitution effect for consumption. If consumption is a normal good, an increase in the wage rate results in a income effect, but if consumption is an inferior good, the income effect is . True or False: The person's consumption may fall as a result of the higher wage if consumption is an inferior good. True False
- Consider an indifference curve for someone deciding how to allocate time between work (and thus consumption) and leisure. Suppose the wage increases. The substitution effect induces a person to work and consume (more , less) ? in response to higher wages. If consumption is a normal good, the income effect induces the person to consume ( more, less) ? when the wage rises, but if consumption is an inferior good, the income effect induces the person to consume ( more , less) ? in response to higher wages. True or False: The person's consumption may fall as a result of the higher wage if consumption is an inferior good. True or FalseIndividual that consumes two goods (X and Y) and has a CES Utility Function of the form: U = 100(X^(0.75) + Y^(0.75)). Income of 1000, the price of Good X is 10 and the Price of Good Y is 20 a) Find the Marginal Rate of Substitution as a function of the quantities consumed of Good X and Good Y. b) Write out the Lagrangian for this problem. c) Solve to find the demand for Good X, the demand for Good Y, and the highest level of utility for this individual. d) Now consider an increase in the price of Good X to 20. What is the demand for Good X and Good Y? What is the Utility of the consumer following the price change? e) Considering the change in demand for each good between parts c) and d), how much is due to the substitution effect and how much is due to the income effect? f) Show your answers on a graph.A basket of goods for a given consumer includes two goods, X and Z. Consumer income is equal to $1,500 and the prices of these two goods are as follows: Px = $25 Pz = $25 This consumer is consuming10 units of good X. Suppose that over the course of a year, the price of good X changes by 10% and the price of good Z changes by −10%. How much income would be required for the consumer to afford the same quantity of goods X and Z with the new prices? $______
- If bananas are on the x-axis and apples are on the y-axis, then the marginal rate of substitution is (select all that apply): MUa/MUbMUa/MUb MUb/MUaMUb/MUa the absolute value of the slope of the indifference curve that goes through the current consumption bundle.the absolute value of the slope of the indifference curve that goes through the current consumption bundle. the number of apples the consumer is willing to give up to get an additional banana.the number of apples the consumer is willing to give up to get an additional banana. the number of bananas the consumer is willing to give up to get an additional apple.Consider the indifference curve map and budget constraint for two goods, X and Y. Suppose the good on the horizontal axis, X, is normal. When the price of X increases, the substitution effect a) and income effect both cause an increase in the consumption of X. b) causes a decrease in the consumption of X, and the income effect causes an increase in the consumption of X. However, the substitution effect is greater than the income effect. c) causes an increase in the consumption of X, and the income effect causes a decrease in the consumption of X. However, the substitution effect is greater than the income effect. d) and income effect both cause a decrease in the consumption of X.Suppose the price of goods X and Y are Px = 4 and Py = 2. with their current consumption bundle, a consumer would be willing to trade 3/2 units of good Y for one unit of good X. At these prices, the consumer should... Consume more of both X and Y. Consume more of good X and less of good Y. Consume more of good Y and less of good X. Keep their consumption bundle the same.
