Problem 1Mary has the following utility function: u(x, y) =I = 10 and the prices originally are p̟ = 1 and p, = 23 In(x) + 2y. Her income is given by%3D(a) What are Mary's marshallian demands?(b) How much of each good is Mary currently consuming?(c) What is the utility level that Mary can achieve?(d) Assume the price of r increases to p, = 3, find Mary's new levels of consumption.(e) Find the total, substitution and income effects for good r caused by the price change.Consider this price change a "large" price change (Apz = p, - Px = 3 – 1 = 2).

Given that, Mary utility function: U(x,y) = 3 ln(x) + 2y Her income ( I) = 10 Px = 1 Py= 2

Answered: Problem 1 Mary has the following…

Problem 1 Mary has the following utility function: u(x, y) = 3 In(x) + 2y. Her inc I = 10 and the prices originally are p, = 1 and p, = 2

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter6: Demand Relationships Among Goods

Section: Chapter Questions

Problem 6.9P

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Concept explainers

Form Utility

The term utility in general refers to the satisfaction earned from usage of a particular product or service. Utility always plays an important role because it influences various important elements like demand & thereby the price of the good or service as well. Though utility is not easy to measure, various types of economic models can be used indirectly. There can be various types of utilities like economic utility, marginal utility, cardinal utility, form utility.

Question

Problem 1
Mary has the following utility function: u(x, y) =
I = 10 and the prices originally are p̟ = 1 and p, = 2
3 In(x) + 2y. Her income is given by
%3D
(a) What are Mary's marshallian demands?
(b) How much of each good is Mary currently consuming?
(c) What is the utility level that Mary can achieve?
(d) Assume the price of r increases to p, = 3, find Mary's new levels of consumption.
(e) Find the total, substitution and income effects for good r caused by the price change.
Consider this price change a "large" price change (Apz = p, - Px = 3 – 1 = 2).

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