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- . Show that Cobb-Douglas preferences are homothetic preferencesWhich of the following utility functions represent preferences that are NOT homothetic? (a) U(X, Y) = 10X ² + y² (b) U(X, Y) = ln(X) + 42 ln(Y) + ² (c) U(X,Y) = 4X¾ +7Y (d) U(X,Y)= XY (e) All of the above utility functions represent homothetic preferencesStyles In an auction, potential buyers compete for a good by submitting bids. Adam Gallinsky, a social scientist from NWU, compared eBay auctions in which the same good was sold. He found on average that, the higher the number of bidders the higher the sales price. For example, in two separate auctions of identical IPods, the one with the higher number of bidders brought the higher sales price. According to Gallinsky, this explains why smart sellers set absurdly low opening prices (the lowest price the seller will accept), such as 1 cent for a new IPod. Use the concept of consumer and producer surplus to explain this reasoning.
- Show that perfect substitutes are an example of homothetic preferencesQuestion 10 Which of the following startements about network externalities is CORRECT? Air pollution is an example of a network externality. For a good with network externalities, the number of people who are willing to buy a unit of the good is uniquely determined by the price. Network externalities are always positive. The manufacturer of a new good with network externalities might give away a free version of the good. For a good with network externalities, one person's valuation of the good is always increasing in the number of other people using the good.Sean is arguing with his girlfriend, Yvette. They have been going out for a little more than two years. YVETTE: I'm leaving you, Sean. Get over it. SEAN: Are you saying that being single will make you happier than you've been with me? Speaking personally, I think the utility we've had in this relationship was much more than you could have had if you'd been single this whole time! YVETTE: I had taken an economics class and the word "utility" rings a bell. It's not that at all. We've had a fine time. It's that the utility I would get by continuing our relationship isn't worth it anymore. SEAN: I've never been dumped by someone citing the law of before. You're a piece of work, you know that? Yvette doesn't hear. She has already walked off, leaving Sean feeling like something of a sunk cost.
- Problem 1 Last week, neither Alistair nor Bodana purchased blueberries (x). Both consumers had $30 to spend on blueberries and/or raspberries (y), the price of the two fruits was $3 per pack and both consumers bought raspberries only. Alistair's utility for blueberries and raspberries is UA(x,y) = x+2y. Bodana's utility for blueberries and raspberries is UB(x,y) = x +12ln(y). a) In two separate graphs, illustrate Alistair's and Bodana's optimal choices. Your graphs must illustrate the consumers' budget constraints and their indifference curves at the optimal bundle. b) At their optimal bundle, what is Alistair's marginal rate of substitution of raspberries for blueberries (- MUx/MUy)? At their optimal bundle, what is Bodana's marginal rate of substitution? This week, blueberries cost $3 per pack just like last week, however raspberries now cost $4 per pack. c) How many packs of blueberries and raspberries will Alistair buy this week? Clearly justify your answer. d) Using the…What is cultural deviance theory?What is the benefit of having an autarky economy. Explain in detail.
- Examples of form utility?Anon is a graduate student at Lock Haven University studying human behavior. Three subjects, Felicity, Terrance, and Lola, listed their utility for pineapple and watermelon. Anon believes he will be able to tell which subject likes pineapple the most by referring to the levels of utility each one reported. His adviser, Dr. Util, tells him his research is flawed. Explain why Dr. Util feels this way.Suppose the utility possibility frontier for two individuals is given by U_a+2U_b=200 Please plot the utility frontier on a graph.