Suppose a consumer has an income I = $50 which he/she spends on pizza and tacos per month. The price of pizza is $10 and the price of tacos is $5. If the units of pizza consumed per month is on the x-axis and the units of tacos consumed per month is on the y-axis, the slope of the budget line is equal to: a) 21 b) ½ c) 2 d) -2
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- Question 2 David spends his budget on chocolate and chip. His utility function is given by ?(?1,?2)= 2?1?2, where ?1 is the number of chocolates he consumers per week, and ?2 is the number of chips he buys per week. A chocolate costs 10 SEK, and a chip costs 20 SEK. David’s weekly budge for consuming on these two goods is 120 SEK. (1) What is David’s budge line? Draw the budget line on a graph with chocolate amounts on the horizontal axis and chip amounts on the vertical axis. Write explicitly at which points budget line crosses the axis. (2) What is David’s marginal utilities for the two goods, respectively? What is his marginal rate of substitution between the two goods? (3) What is David’s optimal choice? Calculate the numerical answer for the optimal bundle. Also draw an indifference curve for David on the same graph as question(1) and show the optimal bundle.Question Four Assume a household with a monthly income of $5,000. This household allocates its income to the purchasing of food and nonfood products. If the average price of food products is $20 per unit and nonfood items cost $150 per unit (a) Write the household's budget equation. (b) If this household consumes 100 units of food products, how many units of nonfood items can it buy? (c) Assume that the price of nonfood products increases to $160. Write the new budget equation. (d) If this household wants to purchase food and nonfood items in the same proportion as in part (b), what is the household's new bundle in part (c)? (e) Assume the household's income increases by 5%. Repeat parts (a) to (d) (f) Assume that due to competition prices of food and nonfood products in decline by 5% while the household's income remains the same. Repeat parts (a) and (b) and Compare your results with part (e). CAMON 11 AI 16M AI Clear SelfieA consumer has an annual budget constraint for two goods: “housing sq. ft." and "$ for everything else". Draw the budget constraint for this consumer if income (v) = $50,000 and price per sq. ft. of housing, ph, is S200. Please be sure to fully label your graph (i.e., slope, intercept, etc.). Note: plot "housing sq. ft." on the x-axis. How would this consumer's budget line change if she received a $5,000 raise and the price of housing increased to $250? Include a graph with your answer. How did the economic rate of substitution (ERS) between housing and $ for everything else change when pa changed? Please interpret the ERS both before and after the price change.
- Kate’s utility function includes coffee (c) and sugar (s). She only consumes coffee and sugar together, and she only consumes in the ratio of one unit (cup) of coffee with two units (spoons) of sugar. Her utility function is What is her marginal utility of sugar if she has 4 cups of coffee and 6 spoons of sugar? Remember that unit are infinitely divisible (you can have parts of units). (a) 0 (b) 1 (c) ½ (d) 24 Part Question on Caesar * * PART 1 * * Caesar has preferences that are described by the utility function u = 3x 1 + 5x 2. Caesar strictly prefers the bundle (x 1, x 2) = (0, 6.6) to the bundle A. (3, 3) B. (5, 3.6) C. (0, 8.4) D. (11, 1.8) E. (8, 3.60) * * PART 2 * * What is the functional form of Caesar’s preferences, or indifference curves? A. Linear (perfect substitutes) B. Leontief (perfect complements) C. Satiation D. Concave, but not strictly concave E. Cobb-Douglas * * PART 3 * * Caesar’s preferences are A. strictly convex. B. definitely not well-behaved. C. definitely well-behaved. D. strictly concave. E. neutral. * * PART 4 * * Caesar has been consuming the bundle (x 1, x 2) = (10, 2.4). At this point, what is the marginal rate of substitution? A. – 0.25 B. –0.6 C. – 1.67 D. – 3.0 E. – 5.0.3- Assuming that the equation F(U, x, X2 = f(x1, x2,, ... Xn): ******* **** ,xn) = 0 implicitly defines a utilityfunction U 073 a) Find the expressions for 60, 6U and 6x4 " 3 6x2 6xn 6x2 6xn b) Interpret their respective economic meanings. c) Now. assume the utility function is U(x, y) = y√x. Does the consumer believe that more is better for each good? Do the consumer's preferences exhibit a diminishing marginal utility of x? Is the marginal utility of y diminishing?
- 1. For each of the three utility functions below, find the substitution effect, the income effect, and the total effect that result when prices change from p = (2,1) to p' = (2,4). Assume the consumer has income I = 20. (a) Before doing any calculation, make an educated guess about the relative magnitude of the three substitution effects and the three income effects to be found below. (b) u(x1, x2) = x1 + x2. (c) u(x1, x2) = x1x2. (d) u(x1,x2) = min {x1,x2). (e) Rank the substitution effects and the income effects found above by their magnitude. To what extent do they conform to your guess?11)Which of the following describes what happens to a consumer's budget line if that consumer's budget increases? The budget line. A) becomes steeper. B) shifts farther away from the origin of the graph. C) does not change. D) becomes more horizontal. E) shifts closer to the origin of the graphAlexi has a budget of $21 to spend on toaster and breads. He does not directly gain any utility from owining a toaster but for every slice of toasted bread he consumes he gain 2 units of utility, that is if he owns a toaster. Without the toaster, he gain 0 units of utility from consuming plain bread. Suppose the toaster has inferior quality and will break after toasting only 10 slices, then Alexi needs to buy a new one. The current market price for cheap toaster is $5 and the price for a single slice of bread is $1. Assume that Alexi aims to maximize consumer surplus. Find Alexi's income-consumption curve for slices of bread for incomes between $0 and $21, assuming a price of $1 per slice.
- Alexi has a budget of $21 to spend on toaster and breads. He does not directly gain any utility from owining a toaster but for every slice of toasted bread he consumes he gain 2 units of utility, that is if he owns a toaster. Without the toaster, he gain 0 units of utility from consuming plain bread. Suppose the toaster has inferior quality and will break after toasting only 10 slices, then Alexi needs to buy a new one. The current market price for cheap toaster is $5 and the price for a single slice of bread is $1. Assume that Alexi aims to maximize consumer surplus. In a graph, draw total utility as a function of number of toasted slices, assuming that Alexi buys 1 toaster.Write down the equation for the budget constraint and then graph it for .. Px = $100 Py = $25 Income = $5,000.00The budget constraint for a consumer who only buys apples (A) and bananas (B) is PAA + PBB = I where consumer income is I, the price of apples is PA, and the price of bananas is PB. To plot this budget constraint in a figure with apples on the horizontal axis, we should use a budget line represented by what slope-intercept equation?