ADVANCED ANALYSIS Let: MUA=Z=16-3x MUB=z=14-2y, where z is marginal utility per dollar measured in utils, x is the amount spent on product A, and y is the amount spent on product B. Assume that the consumer has $9 to spend on A and B-that is, x+y= 9. Instructions: Enter your answers as a whole number. a. How is the $9 best allocated between A and B? $ on A and $1 on B b. How much utility will the marginal dollar yield? utils

ADVANCED ANALYSIS Let: MUA=Z=16-3x MUB=z=14-2y, where z is marginal utility per dollar measured in utils, x is the amount spent on product A, and y is the amount spent on product B. Assume that the consumer has $9 to spend on A and B-that is, x+y= 9. Instructions: Enter your answers as a whole number. a. How is the $9 best allocated between A and B? $ on A and $1 on B b. How much utility will the marginal dollar yield? utils

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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ADVANCED ANALYSIS Let: MUA/PA=ZA = 10 - 1 Instructions: Enter your answers as a whole number. How is the $10 best allocated between A and B? MUB/PB=ZB=21-2y, where z is marginal utility per dollar measured in utils, x is the amount spent on product A, and y is the amount spent on product B. Assume that the consumer has $10 to spend on A and B-that is, x+y=10. Note: Px = $1 and Py = $1. LA on A and $ on B How much utility will the marginal dollar yield? utils Prev 1 of 7 Exit Submit Next > Check my work
25. What does a negative marginal utility means? Why does it happen? Explain.
1. Muhammad enjoys going to the aquarium (x) and playing basketball (y). His preferences on x and y are described by his utility function: U(x, y) = 100x23y3. He has a budget of £120 per week to spend on playing basketball and going to the acquarium. Knowing that p,=10 and py=10: ,2/3,1/3 (A) Find the optimal combination of x and y so that Muhammad maximizes his utility subject to the budget constraint. Show this graphically. (B) Consider now that the price of going to the aquarium increases to £20, the price of playing basketball is now £15 and the income did not change. How does this modify Muhammad's optimal bundle? Show this graphically. (C) Compare the optima in (A) and (B): has the valuation of y in terms of x changed? Explain.
3. Tony is throwing a party at his Fraternity and is trying to choose what booze to buy. A bottle of vodka has three times the alcohol as a six-pack of beer. Assume that Tony only cares about the total amount of alcohol in his basket. (use vodka on the X-axis and beer measured in six-pack on the Y-axis) a) Devise a utility function to represent these preferences. b) Suppose a bottle of vodka costs $40, a six-pack of beer costs $10, and the budget is $200. Write the budget constraint. c) Solve Tony's utility maximization problem and find the optimal combination. d) Suppose that a bottle of vodka cost has increased to $50. What will be his new optimal combination?
1. Enumerate and explain the properties of Consumer Preference. 2. Illustrate and explain the Utility Maximization
John likes Coca-Cola. After consuming one Coke, John has a total utility of 10 utils. After two Cokes, he has a total utility of 25 utils. After three Cokes, he has a total utility of 50 utils. Does John show diminishing marginal utility for Coke or does he show increasing marginal utility for Coke? Suppose that John has $3 in his pocket. If Cokes cost $1 each and John is willing to spend one of his dollars on purchasing a first can of Coke, would he spend his second dollar on a Coke, too? What about the third dollar? If John’s marginal utility for Coke keeps on increasing no matter how many Cokes he drinks, would it be fair to say that he is addicted to Coke? *use tables and/or graphs if possible, please original work
1. A consumer has an income of $3024 to spend each day. The only two goods the consumer is interested in purchasing are goods A and B. The marginal-utility schedules for these two goods are shown in the table below. The price of B does not change and is $378. The marginal utility per dollar from B is also shown in the table. But the price of A varies as shown in the table. The marginal utility per dollar from A when the price of A is $1512 and $756 is shown in the following table. Good A Good B Quantity MU MU/$1512 MU/$756 MU MU/$378 1 24 2 15 3 12 4 8 5 6 6 4 48 32 24 16 8 4 ||||| ||||| |||
1. What is the Total Utility of the second unit? 2. What is the Marginal utility of the third, fourth and the fifth unit? 3. Explain the relationship between Total Utility and Marginal Utility. 4. At which rate is total utility increasing: a constant rate, a decreasing rate, or an increasing rate? How do you know? 5. “It is possible that a rational consumer will not purchase any units of the product represented by these data.” Do you agree? Explain why or why not. 6. In the last decade or so there has been a dramatic expansion of small retail convenience stores (such as 7 Eleven, Kwik Shop, and Circle K), although their prices are generally much higher than prices in large supermarkets. What explains the success of the convenience stores?
1. What is the Total Utility of the second unit? 2. What is the Marginal utility of the third, fourth and the fifth unit? 3. Explain the relationship between Total Utility and Marginal Utility. 4. At which rate is total utility increasing: a constant rate, a decreasing rate, or an increasing rate? How do you know? 5. “It is possible that a rational consumer will not purchase any units of the product represented by these data.” Do you agree? Explain why or why not. 6. In the last decade or so there has been a dramatic expansion of small retail convenience stores (such as 7 Eleven, Kwik Shop, and Circle K), although their prices are generally much higher than prices in large supermarkets. What explains the success of the convenience stores? ****FIRST 3 SUB-PARTS ANSWERED ALREADY ONLY NEED LAST 3****
I. You only consume two goods and your preferences are represented by utility function 2 U(x₁, x₂) = (x1.5 + x2.5) for x₁ > 2 and x₂ > 0.
3. Susan has the following utility function U(x,y) = xy, where x represents food and y represents other goods. Susan has £20 (budget m) to spend on these two goods. Suppose that the initial price of x (Px) is £1 per unit, and that of y (Py) is £1 per unit. Note that MUx=y and MUy=x. (i) How many units of x and y will Susan purchase? Assuming that Px varies and m and Py stay constant at the values £20 and £2, respectively, what is the individual demand function for x? (ii) What are the characteristics of the individual demand function for x? What is its aggregate counterpart, and what is its economic importance?
1. Doreen is looking for a flat to rent in Brighton. a. In choosing a flat, she cares about two characteristics: the number of bedrooms (x), and the number of bathrooms (y). Her utility function is U(x,y) = min(x, 2y). She has £1000 to spent on rent per month. The rental price per bedroom in Brighton is £400, and the price per bathroom is £200. (For example, a flat with three bedrooms and two bathrooms would rent for £1600 per month.) How many bedrooms and bathrooms does Doreen choose to rent optimally? b. Doreen now needs to furnish her flat. She has £500 to spend. However, she would also like to buy some clothes for her new job. The cost of furniture f is £50 per unit and the cost of clothing c is £20 per unit. Her utility function over furniture and clothing is U(f.c) = f0.3c0.7. How much does she spend in total on furniture, and on clothing? c. The local furniture shop runs a flash sale of 50% off, on all prices. How much does Doreen now spend on furniture, and on clothing?…