Q: What are the assumptions of the law of the diminishing marginal utility in economics
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A: Answer -
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A: Q: Discuss how the utility-maximization model helps highlight the income and substitution effects of…
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Q: Let the utility function of a consumer is given by the following function U = (x + 1)(y + 1) a. Find…
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Q: Mary has the utility function u(x, y) = Inx + x^2. Are her preferences strongly convex?
A: u (x,y) = ln x +x2
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A: We have to find logarithmic transform of the utility function.
Q: Q1. Bob has a utility function defined over goods 1 and 2: u(x1; x2) = min{6*x1 + x2, x1 + 2*x2}…
A: u(x1; x2) = min{6*x1 + x2, x1 + 2*x2}
Q: Describe the two approaches of utility analysis !
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Q: Consider an agent whose preferences over any couple (r1, 22), where r1 E R4 and r2 E R+, e.g.,…
A: Answer -
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Q: A person with utility function Ux, y) = 5+ y+ 2x has nonconvex preferences. True False
A: Answer:- TRUE
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Q: Enumerate at least five interpretations of the graph of the Marginal Utility curve
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A: Answer: When the income of consumers rises then the budget line shifts outward. In that case, the…
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A: Indifference curve shows combinations of two goods that give same level of utility.
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- What is the logarithmic transform of the utility function U=xα1xβ2xγ3 given the budget constraint px1x1+px2x2+px3x3=M . Select one: a. ln U=ln xα1+ln xβ2+ln xγ3 b. ln U=ln xγ1+ln xβ2+ln xα3 c. ln U=α ln x1−β ln x2−γ ln x3 d. ln U=α ln x1+β ln x2+γ ln x3What is the logarithmic transform of the utility function U=xα1xβ2xγ3U=x1αx2βx3γ given the budget constraint px1x1+px2x2+px3x3=Mpx1x1+px2x2+px3x3=M. Select one: a. ln U=ln xα1+ln xβ2+ln xγ3ln U=ln x1α+ln x2β+ln x3γ b. ln U=α ln x1−β ln x2−γ ln x3ln U=α ln x1−β ln x2−γ ln x3 c. ln U=α ln x1+β ln x2+γ ln x3ln U=α ln x1+β ln x2+γ ln x3 d. ln U=ln xγ1+ln xβ2+ln xα3Claire has the following utility function: ??(??, ??) = ??1/2??1/2 and faces the budget constraint: ?? = ?????? + ??????. Suppose ?? = 120, ???? = 1 and ???? = 4. Find the optimal ??and ??
- Find Indirect utility function of the following function U = max (X, Y) subject to the budget constraint P, X+ P₂ Y=M Optionis O O max (P1 P2) M² min (P1 P2) M² P1+ P2 M min (P1 P2)Anna has an income of 1000 euros and utility function U(x,y)=x²y³. The prices of the two goods are P₁=5 and Py-20. a) Define the budget constraint and represent it graphically. (While visiting family in Mexico, your professor has a budget of $ 255 ($ = pesos) that he spends on tacos and tequila. The price of tacos is $ 6 and a shot of tequila is priced at $ 16. During his visit the price of tacos changes to $ 5. Assume your professor has a Cobb-Douglas utility function with (tacos) parameter a = ( 27 / 100). How many shots of tequila does your professor purchase ? (Assume both goods are commodities.) (Answer is : 11.63)
- Linda loves buying shoes and going out to dance. Her utility function for pairs of shoes, S, and the number of times she goes dancing per month, T, is U(S + T) = 2ST, so Mus = 2T and Mut = 2S. It costs Linda $50 to buy a new pair of shoes or to spend an evening out dancing. Assume that she has $500 to spend on shoes and dancing What is the equation for her budget line? Draw it (with T on the vertical axis), and label the slope and intercepts. What is Linda’s marginal rate of substitution? Explain. Use math to solve for her optimal bundle. Show how to determine this bundle in a diagram using indifference curves and a budget line• Question #20: While visiting family in Mexico, your professor has a budget of $ 304 ($ = pesos) that he spends on tacos and tequila. The price of tacos is $ 14 and a shot of tequila is priced at $ 12. During his visit the price of tacos changes to $ 14 . Assume your professor has a Cobb-Douglas utility function with (tacos) parameter a = ( 29/ 100 ). What is the substitution effect on purchases of tacos ? (Assume both goods are commodities.)Which of the following utility functions represent preferences which do not satisfy monotonicity? 1 U= - x+y 1 U= - 5ху Ou=xy O u= y
- suppose a consumer consumes two goods x and y with utility function u=x^0.5+y^1.5, does the utility funciton exhibit diminishing marginal utility for (i) x (ii)y?Consider the following utility function for goods x1 and x2: u(x1,x2)=(x1+x2)2 What type of preferences does this utility function represent and why?Linda loves buying shoes and going out to dance. Her utility function for pairs of shoes, S, and the number of times she goes dancing per month, T, is U(S,T) = 2ST, so MUs = 2T and MUT = 2S. It costs Linda $50 to buy a new pair of shoes or to spend an evening out dancing. Assume that she has $500 to spend on shoes and dancing. A. What is the equation for her budget line? Draw it (with T on the vertical axis) and label the slope and intercepts. B. What is Linda's marginal rate of substitution? Explain. C. Use math to solve for her optimal bundle. Show how to determine this bundle in a diagram using indifference curves and a budget line.
