Fred is shopping for fresh fish (F) and scallops (S). Let's assume fish are on the y-axis. Fred is considering buying a bundle of 2 fish and 10 scallops. At this bundle, he's willing to give up 1 fish for 5 scallops. His MRS is then If the price of a fish is $2 and the price of a scallop is $1, then the price ratio is Rather than buying the bundle of 2 fish and 10 scallops, Fred should

Fred is shopping for fresh fish (F) and scallops (S). Let's assume fish are on the y-axis. Fred is considering buying a bundle of 2 fish and 10 scallops. At this bundle, he's willing to give up 1 fish for 5 scallops. His MRS is then If the price of a fish is $2 and the price of a scallop is $1, then the price ratio is Rather than buying the bundle of 2 fish and 10 scallops, Fred should

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter10: Consumer Choice Theory

Section: Chapter Questions

Problem 4P

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Let the following table represents the total utility of a given consumer, in the cardinal utility approach. Q 1 2 3 4 5 6 7 TUX 8 14 18 20 20 18 16 TUY 6 10 13 15 16 16 14 MUX MUY MUX/PX MUY/PY Calculate the MUX and MUY and fill the table in the 4th and 5th rows. If the two products (X&Y) are free goods how many of X and Y should the consumer take to maximize utility? What is the maximum utility of X and Y if they are free? Let now price of X is 4 birr per unit and price of Y is 2 birr per unit. Calculate MUX/PX and MUY/PY and fill the 6th and 7th row. Assuming the consumer has any amount of money (enough budget) how many of X and Y should the consumer buy, to maximize utility? What is the total utility of X and Y? Let now price of X is 4 birr per unit and price of Y is 2 birr per unit and budget of the consumer for consumption of X and Y is 20 birr. Given budget constraint how many of X and Y should the consumer buy to maximize utility?
4 Emily goes camping on the weekend and eats marshmallows (M) and crackers (C) there. She wants to match 1 marshmallow with 2 crackers, but does not eat in different proportion (i.e., perfect com- plement). The price of a marshmallow is 10 cents and the price of a cracker is 5 cents, and she spend up to $3 in total. a) Write down a utility function which represents Emily's preferences over marshmallows and crackers. b) How many marshmallows and crackers is she going to consume? (Hint: the first-order conditions will not help; draw the budget constraint and the indifference curves and look at the highest one that intersect the budget constraint). c) What is the exact value of Emily's indirect utility?
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Let's suppose that an individual prefers bundle of goods A over another bundle of goods B. Let's suppose that the individual prefers the bundle of goods C to the bundle of goods B. Then we can say the individual prefers C to A because more is better than less the individual prefers A to C because more is better than less two answers are correct no answer is correct O the individual prefers A to C; because of transitivity the individual prefers C to A because of transitivity