3. Assume that good x is on the horizontal axis and good y is on the vertical axis, and that preferences are complete, transitive, monotonic and convex. Suppose the income consumption curve is upward sloping and consider the truthfulness of the following statements. I. The price consumption curve as the price of x changes must be upward sloping too. II. The demand curve for good y must be downward sloping. a. Only statement I is true. b. Only statement II is true. c. Both statements I and II are true. d. Neither statement is true.
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- 1. Assume that when the price of X decreases the consumption of Y remains the same. Draw the appropriate indifference curves and budget lines, label the axes, and the optimal consumptions. Also, in your graph show and label the price-consumption curve. How would you determine, using your graph, if X is a normal good? Explain2. Use indifference curves and budget lines to derive the demand for good X graphically provided that the demand for X is very inelastic but not perfectly inelastic. You need to show this using two graphs: in one on the left show the appropriate indifference curves and budget lines, in the other show the derived demand. Label the axes, prices, quantities, optimal consumption bundles appropriately so the relationship between the graphs becomes evident.Economics. Kindly solve this with explanation Consider a 2-good economy and a consumer endowed with a positive net income m. If the unit prices of goods are p1 and p2 with p1=2p2 and the consumer is invariably indifferent between 5 units of the first good 1 and 8 units of the second good 2. Than the consumer will choose to consume amounts x1 of the first good and x2 of the second good such that; P1x1=p2x2 X=0, x2>0 X1>0, x2=0 None of the answers is correct
- Answer the following short questions:a. Suppose that a consumer’s preferences between goods x andy are represented by the utility function u(x, y) = x^2 + 16xy + 64y^2. If these two goods have the same price, describe the optimal consumptionchoice of this consumer.b. Suppose that when the price of a good change, the incomeand substitution effects change the consumer’s demand for that goodin opposite directions.i. Is this good a normal or an inferior good? Explain.ii. Is this good a Giffen or an ordinary good? Explain.c. Is the following statement true or false? The differencebetween a monopolist’s marginal cost and its profit-maximizing price issmaller when the demand is more elastic.Principles of Economics 1 | S1 21/22 Time left 0:5) When the price of one good increases and the price of the other good and income are held constant, the budget line Select one: shifts parallel to the original budget line so that the new budget line is farther from the origin O b. shifts parallel to the original budget line so that the new budget line is closer to the origin rotates so that the intercept is farther from the origin on the axis representing the good that has experienced an increase in price O a. O c. O d. rotates so that the intercept is closer to the origin on the axis representing the good that has experienced an increase in price Next pageIf Utility Function is U = 5x1/2x2 with x1 and x2 goods and p1 = $10 and p2 = $15, so if income is $20,000: a) Calculate x1 and x2 to maximice consumer utility and what is consume utility. Graphic your results b) If income rises to $25,000 so what are new values for x1, x2 and utility? Graphics yourr results
- 4.. If the preferences are concave, will the consumer ever consume both of the goods together?5. Janice consumes two goods, X and Y. Janice has a utility function given by the expression: U=4X05Y05 and current prices of X and Y are $25 and $50, respectively. Janice currently has an income of 750 unit per time period. a. Write an expression for Janice's budget constraint. b. Calculate the marginal rate of substitution of X for Y. (horizontal line X, vertical line Y). c. Calculate the values of X and Y that will maximize utility. d. Graph your answers (budget line, indifference curve)3. Assume that the price of goods x increases. If x is a normal good, the substitution effect alone leads to a decrease in consumption of x.
- 1..Calculate the optimal quantity of each of two goods (x and y) and the consumers’ total utility given Px=1, Py=2, I=80, and U(x,y) = x1/2y. How would you represent this graphically? What is value of the utility received by consumer at optimal consumption? Explain all your steps. N.B. You can attach your explanationsShow that the price-consumption curve can be horizontal or downward sloping. is Assume that the price of good X on budget line L¹ P₁. Then the price of good X decreases to p2, pivoting the budget line to L². Using the line drawing tool, draw the price-consumption curve. Label this line 'Price-consumption curve.' Carefully follow the instructions above, and only draw the required object. C Y, Good Y X, Good X +3_~ZConsider John who consumes two goods, (X and Y), with prices ?? = ?$35, ?? = ?$25 and income I =N$1500 i) Construct budget constraint and draw John’s budget line with good X on the horizontal axis. (ii) Use a graph to show the effect of an increase in income from N$1500 to N$2000. What will happen to the slope of the budget line if the price of good X decreases to N$18?