Let the utility function be U(q1. 92) = Min{ q1. 292). Let p1 =2 and p2=2. Income is $30 per week. a. Suppose that q1 represents a cup of coffee (250ml) and q2 represents a teaspoon (5ml) of sugar. Interpret the utility function above in words. b. On a large well-labelled diagram, indicate the equilibrium number of coffees with sugar that this individual consumes in a week. c. Suppose that the price of a cup of coffee (with no sugar) doubles to $4. Carefully draw in the new equilibrium on your graph from part b

Let the utility function be U(q1. 92) = Min{ q1. 292). Let p1 =2 and p2=2. Income is $30 per week. a. Suppose that q1 represents a cup of coffee (250ml) and q2 represents a teaspoon (5ml) of sugar. Interpret the utility function above in words. b. On a large well-labelled diagram, indicate the equilibrium number of coffees with sugar that this individual consumes in a week. c. Suppose that the price of a cup of coffee (with no sugar) doubles to $4. Carefully draw in the new equilibrium on your graph from part b

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter10: Consumer Choice Theory

Section: Chapter Questions

Problem 9P

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4. If we have the utility function, U(x)=(x−7)^2, and we know that there is an indifference set around x = 4 and an upper contour set of x = 6. How to graphically represent this function? I'm confused about how to draw the upper contour set on the graph? I know the concept that upper contour is the area over the convex line, but don't know how to put it on the graph. Could you draw a simple graph to help me identify the upper contour?
1. Suppose Frank enjoys traveling and his utility is a function of the number of airplane trips he takes and the number of bus rides he takes. His utility function is given by U(b,p) = 3b0-4p0.8. A trip on a plane costs $400, a trip on the bus costs $50 and Frank has $3,000 to spend on travel. a. Draw Frank's budget line on a graph with bus trips on the vertical axis. b. Calculate AND INTERPRET the slope of Frank's budget line. c. Draw a representative indifference curve on your graph and provide a function that describes the slope of this indifference curve (i.e., find Frank's marginal rate of substitution). What is the INTERPRETATION of the marginal
1. 2. Suppose Frank enjoys traveling and his utility is a function of the number of airplane trips he takes and the number of bus rides he takes. His utility function is given by U(b,p) = 3b0-4p0.8. A trip on a plane costs $400, a trip on the bus costs $50 and Frank has $3,000 to spend on travel. a. Draw Frank's budget line on a graph with bus trips on the vertical axis. b. Calculate AND INTERPRET the slope of Frank's budget line. c. Draw a representative indifference curve on your graph and provide a function that describes the slope of this indifference curve (i.e., find Frank's marginal rate of substitution). What is the INTERPRETATION of the marginal rate of substitution? d. What two conditions must be met in order for Frank to maximize his utility? e. What are the utility maximizing quantities of plane trips and bus trips for Frank? Given income of $1000, Px = 25 and Py = 40, find (1) a function for the MRS and (2) the utility maximizing consumption bundle for each of the…
The data presented in Table 1 below has the utility function schedule of an individual with an income of $500. The individual’s objective is to maximise utility when consuming two products – Rice and Legumes. Do the following a. Derive the Total Utility schedule for Legumes and the Marginal Utility schedule for Rice. b. Determine the equilibrium consumption of Legumes and Rice before the price change in Legumes c. Determine the equilibrium consumption of Legumes and Rice after the price change in Legumes d. Derive the demand curve for Legumes Units Consumed Legumes ($100) New Price of Legumes ($50.00) Rice ($50.00) TU MU MU/P MU/P* TU MU MU/P 0 0 0 0 1 1200 500 2 1000 900 3 900 1250 4 800 1550 5 600 1800 6 300 2000 7 200 2150
2. Tom spends all his $100 weekly income on two goods, apples and bananas. His utility function is given by U (A, B) = AB, where A and B stand for the quantity of apples and bananas consumed by Tom. If PA = $4 and PB= $10, how many apples and bananas will he consume? Make sure you write out the utility maximization problem explicitly, including the decision variable(s). What if his utility function is given by U (A, B) = A0.5B 0.5?
Imagine you have a movie streaming platform that offers new movies at the time of release. Your market research has revealed the following about your typical consumers’ satisfaction from watching movies: Number of movies (per month) Total Utility or Satisfaction 0 0 1 25 2 47 3 66 4 82 5 94 6 105 The maximum number of movies the consumer watches in a month is 6. (a) Construct a third column for this table to derive “Marginal Utility” corresponding to the number of movies watched. Explain in words what this concept means and why it is important to derive the marginal utilities in pricing.
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With diminishing marginal utility, how do consumers decide how much to consume? Students are expected to give a detailed answer to this question. You must include an explanation about what diminishing marginal utility means in your answer. Concepts such as "budget constraint", "more is better", "utility". "marginal utility", and "marginal utility per dollar spent" must be used in your answer. No graph or calculation is required in this question.
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1. Pindyck and Rubinfeld (2018) Chapter 4 Appendix, Exercise #5 Jae has the following utility function: U(X,Y)= 20X+ 80Y – X² – 2Y?, where X is consumption of CDs, with a price of $1, and Y is consumption of movie videos, with a rental price of $2. Jae plans to spend $41 on both forms of entertainment. Determine the number of CDs and video rentals that will maximize Jae's utility. а.
Question 1 A consumer purchases two goods, food and clothing. The utility function is U(x, y) = √xy. where x denotes the amount of food consumes and y the amount of clothing. The marginal utilities are MUX = √y/(2√x) and MUX=√x/(2√y). The price of food is Px, the price of clothing is Py, and income is I. a) Show the equation for the demand curve for food is x = 1/(2Px). b) Is food a normal good? Draw D₁, the consumer's demand curve for food when the level of income is I = RM120. Draw D₂ the demand curve when I = RM200.
BUS202-80-81 FA20-Meta: Micro Economics / October 19 - October 25 / Chapter 6 Lecture Ch06-16 S13 4:28 Doughnuts =$2.00 and Books = $24 %3D BUS202 Ch06 v2 16 Budget Constraints, Utility, and Indifference Curves: Doughnuts =$2.00 and Books = $24 120 2. 120) 100 F (5. 100) B (3, 84) H (3, 70) GO Uh G (G, 40) 40 Um 20 UI 10 12 Books What Is the specification of the Budget Constralnt? Where Is Consumer Equilibrlum? ► ) 2:48 / 4:28 YouTube E3 CC Cs Question 14 66. In the video, which market basket is the utility maximizing choice for the consumer? us Not complete Thkg Select one: Points out of 1.00 а. F P Flag b. A question С. G O d. B Check MacBook Pro 2.