1. and 2. 2. Derive the household’s intertemporal budget constraint in terms of C,, C2, Y1, Y2, and r. 3. State the household's utility maximization problem. 4. Find the optimal level of consumption in period 1, C,, in period 2, C2, and the associated level of saving, S,. Express your answer in terms of Y, , Y,, and r.
Q: (ii) Assume that you have an income of £20,000 in each of two periods (1 and 2) and can lend and…
A: Given information Income in each period=20000 Interest rate=10% Utility function…
Q: Intertemporal budget constraint. Budget line 1: Y1 = $900. Y2 = $600. The interest rate is 12…
A: Utility refers to the amount of satisfaction consumers' get from the consumption of goods and…
Q: given f(x,y) = 9x2 - 2xy + 8y2, and Px= 12, Py= 1 and income, I = 165. Construct the budget…
A:
Q: Suppose that c= a+by, where c= consumption, a = consumption at zero income, b = the slope of the…
A: Consumption function is a function which shows relationship between consumption and income. Hence,…
Q: 14) If the expenditures of Salih are equal to his income, it means that he is consuming at a point…
A: A budget line shows the combination of two goods that a consumer can purchase with the given level…
Q: Given a market rate of interest, r, and a subjective consumer time discount rate, 8; explain and…
A: The interest rate is a proportion of the principal—the amount borrowed—that a lender charges a…
Q: Suppose that C = a + bY, where C = consumption, a = consumption at zero income, b = slope, and Y =…
A: As we answer 3 subparts and the question has more than 3 subparts, we would be answering the first 3…
Q: A consumer has $280 to spend on two commodities, the first of which costs $2 per unit and the second…
A: Given, total income = 280 Budget constraint: 2 x + 5 y = 280 Utility function: U(x, y) = 100 x 0.25…
Q: Picabo, an aggressive skier, spends her entire income on skis and bindings. Suppose Picabo has…
A: Given : Income=$8400 Price of skies=$800/pr Price of bindings=$400/pr
Q: 6. Given the savings function S = (3Y2 +2Y)/ ( Y-1) a) Write the consumption function. b)…
A: Answer: Given, Saving function: S=3Y2+2YY-1 (a). Income (Y) = Saving (S) + Consumption (C) Hence, C…
Q: Problem 4 - Costless Magical MacGuffin Consider a consumer that lives only for two periods. He works…
A: Concerning two commodities, an indifference curve is a graph that shows which combinations of the…
Q: 1. For the utility function U(x,,x2) = x9.4x9.6, calculate EV, CV and ACS for an increase in P, from…
A: Given U(x1 , x2 ) = x10.4x20.6 We have to calculate CV, EV and change in consumer surplus
Q: Assume an intertemporal budget constraint that shows how consumption can be traded off between two…
A: We are going to use the concept of present value of the extra amount to be received in the next…
Q: Given the utility function: U = ln c + l + ln c’ + l’ and the budget constraint:…
A: given utility function: U = ln c + l + ln c’ + l’ budget constraint:…
Q: Which of the following events would lead to to shift a household consumption function upawards? A)…
A: Consumption function shows positive relationship between consumption spending and disposable income.
Q: 4. The intertemporal budget constraint with three periods: Consider an economy that exists for three…
A: In economics, the budget limit basically represents all the combinations of the goods and services…
Q: (12) When the consumption function lies above the 45-degree line, households (a)…
A: The point of intersection of consumption and 45 degree line states that savings is zero.
Q: When the consumption function lies above the 45-degree line, households * O Spend on consumption an…
A: The theory that shows the relationship between the spending of the consumer and the different…
Q: c. How does the ratio p,x/p,y depend on the value of ö? Explain your results intuitively. (For…
A:
Q: 4. The intertemporal budget constraint with three periods: Consider an economy that exists for three…
A: Answer given in second step.
Q: Suppose Alice faces the following prices and income across two periods. Prices Income Period 10 1…
A: We have p1=10, p2=12 and m1=200, m2=250and r=5% or 0.05 We have to find an intertemporal budget for…
Q: Your parents give you an allowance of 100 pounds for this year and 110 for the next. Credit markets…
A: The rate could be a proportion of the principal—the quantity borrowed—that an investor charges a…
Q: 8. A consumer bas utility function u(z, y) = VIy, for two goods, X and Y, where c is some positive…
A:
Q: (b) A consumer has $280 to spend on two commodities, the first of which costs $2 per unit and the…
A: Given, total income = 280 Budget constraint: 2 x + 5 y = 280 Utility function: U(x, y) = 100 x 0.25…
Q: QUESTION 2: Suppose that Y=MX+b, where Y=consumption, b=consumption at zero income, M=slope, and…
A: Answer: Given, Consumption function: Y=MX+bWhere,Y=Consumptionb=consumption at zero…
Q: My friend Marie decides to set aside $200 from her paycheck every month. How will this affect her…
A: There are two types of demand schedules in economics: individual demand and market demand.…
Q: A consumer has $280 to spend on two commodities, the first of which costs $2 per unit and the second…
A: Given Price of good X (PX) = $2 Price of good Y (PY) = $5 Income (M) = $280 We know that Budget…
Q: 3. Consider the following utility function, u (x1, 12) = min [lV¤1, Varz), where a > 0 (a) in…
A: Answer; 3. The given utility function is, • u(x1, x2) = min{√x1, ✓(a.x2)} Suppose prices are p1, p2…
Q: Draw graph well explain 4. Inaneconomy C=50 and MPS 0.5. Draw a diagram showing behaviour of…
A: we can draw the graph and solve the equation as follow-
Q: 7 Consider a model in which an individual lives only two periods. This person has diminishing…
A: Given; Income in period 1= $20000 Income in period 2= $5000 Private interest rate= 10%
Q: Suppose you are estimating a consumption function Y₁ = P₁+ B₂X₁+ and a saving function Z₁ = Ø₁ +…
A: Introduction Disposable income is generally consider as the addition of consumption and saving. The…
Q: A consumer's consumption-utility function for a two period horizon is 0.5 U(cg.G) =c,G" ne…
A: Answer - "Thank you for submitting the question. But, we are authorized to solve only 3 sub parts…
Q: Consider a consumer that lives only for two periods. He works in period 1 (and gets income Y1) and…
A: Concerning two commodities, an indifference curve is a graph that shows which combinations of the…
Q: U(xy) = x0.4,0.6 Budget Constraint = | = Pxx + Pyy Solve the expenditure minimization and step lemma
A:
Q: 7. Solve the following maximization problem: max u(x1, x, ) = In(x, ) + x, X1, X2 s.t. 2x, +x,=10
A: Maximisation of utility is a scheme where individuals want to achieve the highest possible level of…
Q: Now suppose that the relevant budget constraint is I2. Would the individual choose B? Why? 3.…
A: (For the vast majority of us, the possibility of shortage and compromises is something we experience…
Q: 6. Which of the following would make the slope of the indifference curve between current consumption…
A: In economics, an individual's decision based on current and future consumption depends upon his…
Q: Suppose that C = a + bY, where C = consumption, a = consumption at zero income, b = slope, and Y =…
A: “Since you have posted a question with multiple sub-parts, we will solve first three subparts for…
Q: b): How a consumer will achieve optimunm level of utility through Ordinal Utility Theory approach?…
A: The demand curve shows the negative relationship between price of the good and its quantity demand.…
Q: In the theory of consumer behavior, certain axioms about the nature of preferences imply that…
A: Note- Since you have asked multiple question, we will solve the first question for you. If you want…
Q: 1.2) Suppose that a consumer’s utility function is U=10 lnx+20 lny. A) Find the marginal utility…
A: The Lagrange multiplier method is used to determine the local minima and local maxima of a function…
Q: 1. For the utility function U(x1,x2) = x*x96, calculate EV, CV and ACS for an increase in %3D P,…
A: Given: U ( x1, x2 ) = x10.4x20.6 P1 = $1 P1*=$2 P2 =1 m=100
Q: Suppose that C = a + bY, where C = consumption, a = consumption at zero income, b = slope, and Y =…
A: Since you have posted a question with multiple sub-parts, we will solve first three subparts for…
Q: 140 120 100 + C. 80 60 40 + S. 40 60 80 100 120 -20 -40 income: Q Given this diagram of Consumption…
A: At income level of 80, level of total desired consumption = 70 This can be easily read from the…
Q: 1. An individual has a utility function, U(q,42) = /91 q2). %3D (Mathematical assistance: x = : (a)…
A: We have given utility function U = (q1q2)1/2 where p1 and p2 are prices of q1 and q2.
Q: 2. The utility function of a consumer who consumes quantities x and y has the utility function…
A: Utility function gives the relation between the different quantities of two or more goods through an…
Q: 3. Suppose the individual has a utility function In(c) where c is consumption and In(-) is the…
A: Lottery A: Prize = 1.25 units with probability 0.5 Prize = 0.75 units with probability 0.5 Lottery…
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- Columns 1 through 4 in the following table show the marginal utility, measured in utils, that Ricardo would get by purchasing various amounts of products A, B, C, and D. Column 5 shows the marginal utility Ricardo gets from saving. Assume that the prices of A, B, C, and D are, respectively, $18, $6, $4, and $24 and that Ricardo has an income of $106. a. What quantities of A, B, C, and D will Ricardo purchase in maximizing his utility? b. How many dollars will Ricardo choose to save? c. Check your answers by substituting them into the algebraic statement of the utility-maximizing rule.Amadea spends all her income on pizza,chocolate milk, and music streams. The price of pizza is $4 per slice and price ofchocolate milk $2 per bottle. At Amadea's current consumption level, her marginalutility for pizza is 50 units per slice and for music 100 units per stream. Assuming thatAmadea is a utility maximizer, how much is (a)her current marginal utility for a bottleof chocolate milk, and (b) the price of streams she buys. Show your work. [Hint: Ch 6:Utility-maximizing formula)Columns 1 through 4 of the accompanying table show the marginal utility, measured in utils, that Ricardo would get by purchasing various amounts of products A, B, C, and D. Column 5 shows the marginal utility Ricardo gets from saving. Assume that the prices of A, B, C, and D are $18, $6, $4, and $24, respectively, and that Ricardo has an income of $105. What quantities of A, B, C, and D will Ricardo purchase in maximizing his utility? How many dollars will Ricardo choose to save? Check your answers by substituting them into the algebraic statement of the utility‑maximizing rule. In other words, show it works when using this rule.
- Use the black line (plus symbols) to plot the line illustrating the combinations of salad and pizza that Andrew can purchase with a budget of $30.00. PIZZA (Slices) 14 12 10 00 4 2 O to 0 2 4 8 8 SALAD (Bowls) 10 12 14 Initial Budget New Budget ? Now suppose Andrew's income is cut in half: That is, he has 50% less money to spend than he did before. On the previous graph, use the blue line (circle symbols) to plot Andrew's new budget constraint. Which of the following statements best summarizes the pattern of causality captured by the graph above? Check all that apply. The relationship between S and P is not a causal relationship. A change in E causes a shift of the budget constraint. A change in S causes a change in P. A change in P causes a change in S.The expression, M = PXX+ PYY is called a budget constraint where M = amount of money available for expenditure; PX= price of commodity X; PY= price of commodity Y; PXX= expenditure on commodity X; PYY= expenditure on commodity Y. Use M = PXX+PYY to express Y as a function of X and note that the graph of this function is called a budget line. Algebraically derive: (1) the y-intercept; (2) the x-intercept. State what determines the slope of the budget line. Graph the function for M = 120; PX= 3; PY= 5 andshow what happens to the original budget line if M decreases by 25% with PX, PY constant.On a given evening, J. P. enjoys the consumption of cigars (c) and brandy (b) according tothe functionU(c, b) = 20c− c²+ 18b − 3b²a. How many cigars and glasses of brandy does he consume during an evening? (Cost isno object to J. P.)b. Lately, however, J. P. has been advised by his doctors that he should limit the sum ofglasses of brandy and cigars consumed to 5. How many glasses of brandy and cigarswill he consume under these circumstances?
- Suppose a consumer has a monthly income of m = 100 which she spendson two commodities: french fries (x1) and beef jerky (x2). The price offrench fries is p1 = 2 and the price of beef jerky is p2 = 5.(a) Write down the consumer’s budget constraint (equation).(b) What is the maximal consumption of french fries (this is calledthe real income in french fries).(c) Find the maximal consumption of beef jerky (real income interms of beef jerky).Tim is buying pizza and salad for a company lunch. Suppose that a slice of pizza costs $4.00, and a bowl of salad costs $5.00. Let ♬ be the amount in dollars that Tim spends on pizza and salad. If Tim buys P slices of pizza and S bowls of salad, then the total amount of money he spends (B) can be represented by the equation Now rearrange the equation you wrote above so that S is written in terms of E and P. The quantity of salad he buys can be represented by the equation Suppose Tim has $40.00 to spend on pizza and salad; that is, E = $40.00. Complete the following table with the values of P or S that make the equation true. Hint: To complete the first row, determine the number of salad bowls Tim can purchase with $40.00, when the number of pizza slices he purchases is 0. Budget Pizza (Dollars) (Slices) 40.00 0 40.00 5 40.00 Use the black line (plus symbols) to plot the line illustrating the combinations of pizza and salad that Tim can purchase with a budget of $40.00. SALAD (Bowis) 14…ote: - You are attempting cuestios suro 12 Neha and Sonam consume only Coke and Pepsi in a two person and two goods exchange economy. Neha consumes these two goods in fixed proportions such that she consumes 2 bottles of coke with 1 bottle of Pepsi. Sonam's utility function is given by U=4P+BC. In the economy, there is a total of 100 bottles of Pepsi and 200 bottles of Coke. If Neha initially had 60 bottles of Pepsi and 80 bottles of coke, then in the equilibrium position, Sonam will consume: A. between 50 to 60 bottles of Pepsi B. between 52 to 60 bottles of Pepsi C. between 54 to 60 bottles of Pepsi D. between 56 to 60 bottles of Pepsi Answer 04:09 PM 19-10-2021
- Pls help me with this homework : Given the following leisure-income bundles, use the chord method to calculate the marginal rate of substitution (MRS) and make sure to use a graph in answering this question, given that the marginal utility of income (MUY) and marginal utility of leisure (MUL) are 4 and 40 respectively : Bundle A: 4 hours of leisure, income equals N$200, utility equals 200 utils; Bundle B: 4 hours of leisure, income equals RI00, utility equals 100 utils; Bundle C: 7 hours of leisure, income equals N$100, utility equals 200 utils. Thank You !!2. Consider a consumer with preferences over current and future consumption given by U(C₁, C₂) = (C₁)¹/2 (c₂) ¹/2 where c₁ denotes the amount consumed in period 1 and c₂ the amount consumed in period 2. Suppose that period 1 income expressed in units of good 1 is m₁ = 20000 and period 2 income expressed in units of good 2 is m2 = 30000. Suppose also that p₁=p2 = 1 and let r denote the interest rate. (a) Find the optimal consumption bundle when r = 0.15. Is the consumer a saver or a borrower?The vending machine in Katherine's office building offers cans of pop and candies. Katherine's utility function is U = 3PC, where P is the amount of pop consumed per %3D week and C is the amount of candy consumed per week. Pop costs $1 and candy costs $0.5 per bag. If Katherine has $10 to spend, she will consume A bags of candy.