Can you do an explanation for this graph please soon as possible. 1. Assume that there are two individuals, A and B. Using the framework discussed in class,graph a scenario where A maximizes her utility by "donating" $10,000 of her income toperson B. Be sure to label your graph accordingly, including the slope of A's budget line.Assume that persons A and B both start out with $50,000 in income. FIGURE 7.2The Optimal IncomeTransfer from anAltruistic PersonAt point C, Franny's MRSbetween her income andZooey's is exactly equal to theabsolute value of the slope ofher budget constraint. Givenher preferences, the best shecan do is give $19,000 of heroriginal $50,000 income toZooey, keeping $31,000 forherself.RING0110 de 50,000wasFranny's incomeTHURTHMIA-THE199ERROdi beac31,000pedimdnoAdsval10,000C29,000TERD12913od yd bommaMenonibba gaib280/21₁B60,000Zooey's income1911 ha

Introduction: Budget constraint: A budget constraint describes all possible combinations of goods…

Answered: Can you do an explanation for this…

Business

Economics

Can you do an explanation for this graph please soon as possible.

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter6: Consumer Choice Theory

Section: Chapter Questions

Problem 3SQP

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5. Sheila and Bruce are taking a canoe trip. Sheila brought 10 boxes of peanuts (x) and 15 bags of chips (y). Sheila's utility function is U*(x,y) = lnvx*+ Invy°. Bruce also brought 20 boxes of peanuts and 5 bags of chips. Bruce's utility function is UB(x.y) = min[x', y'I. a) Illustrate the endowment point and draw a sample set of indifference curves through the endowment point. b) If Sheila and Bruce trade what will be the pattern of mutually beneficial trade? c) If the terms of trade are the number of bags of chips (y) per box of peanuts (x) then what is the largest value that these terms can be for a mutually beneficial trade in this economy? d) Find one mutually beneficial trade where the terms of trade are 1 bag of chips (y) per 2 boxes of peanuts (x). Suppose that Sheila and Bruce set up two competitive markets for peanuts and chips. Below you will show that if the price of peanuts (x) is $1 and the price of chips (y) is $2 then the markets for both peanuts and chips will clear.…
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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4. Sheila and Bruce are going backpacking. Sheila and Bruce each have 24 power bars (x) and 24 ounces of water (y). Their preferences can be represented by: U*(x°,y°) = la xS + la y and U(x",y) = 3lm x# + la y" a) Find Sheila and Bruce's MRS at endowment. Illustrate in an Edgeworth box diagram, the endowment point and the indifference curves through that point. b) What is the pattern of trade associated with mutually beneficial trades? c) Find one mutually beneficial trade where the terms of trade are 2 ounces of water (y) per 1 power bar (x). Instead of trading directly, Sheila and Bruce trade in a market. Sheila and Bruce are price takers on both the power bar and water markets. Each can buy and sell goods at the same price. Let P, be the price of a power bar and P, be the price of an ounce of water. d) Are the prices Px = 4 and Py-1 General Equilibrium prices? Briefly explain. You do NOT need to find the GE prices to answer this question. Do use the MRS at %3D endowment. e) Write…
he Calculus of Utility Maximization and Expenditure Minimization -End of Appendix Problem uppose that there are two goods, X and Y. The price of X is $2 per unit, and the price of Y is $1 per unit. There are two onsumers, A and B. The utility functions for the consumers are UA(X,Y)= X05.05 UB(X,Y)= X0.8y0.2 Consumer A has an income of $100, and Consumer B has an income of $300. Using Lagrangians, solve for the optimal bundles of goods X and Y for both consumers A and B. a. The optimal bundle for consumer A is X = 25 and Y* = 50 - b. The optimal bundle for consumer B is X = 120 and Y* = 60
Suppose that you are thinking about joining COSTCO. You must pay a membership fee, but once you joined you can buy products at a lower price. Assume you would buy only one good, say, paper towels at COSTCO. After careful consideration you think that you are indifferent between joining and not joining COSTCO. Illustrate your dilemma with a graph that includes two budget lines (with or without COSTCO) and an indifference curve. Make sure that you labelled the axes and all the shapes in your graph.
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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 ||||| ||||| |||
3. We claimed in the text that if preferences were monotonic, then a diag- onal line through the origin would intersect each indifference curve exactly once. Can you prove this rigorously? (Hint: what would happen if it intersected some indifference curve twice?)
Matt has $14 to spend on fruit today at the grocery store. The only fruits he likes are apples and oranges. Both cost $2 per pound. Matt's preferences between these fruits are presented in the table below. How many apples and oranges will he buy if he were a utility maximizer? a b с Pounds of Apples 1 2 3 4 5 Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. d Pounds of Oranges 1 2 3 4 5 Apples = 1 pound, Oranges = 2 pounds Apples = 2 pound, Oranges = 5 pounds Apples = 1 pound, Oranges = 1 pound Marginal Utility from Apples Apples = 3 pounds, Oranges = 3 pounds. 200 300 380 440 480 Marginal Utility from Oranges 100 200 250 280 300
GLASS-1: Short Individual Assessment 10 A B E D 1 2 4 cheeseburgers 1. Refer to the figure as you answer the following questions: Bundle C is preferred to Bundle A because Bundle C represents a more balanced Bundle. Do you agree or disagree with this statement and why? Calculate the MRSXY between points A and B, and between points C and D. Interpret your computed values. c. What assumption about preferences would allow you to say that Bundle E is preferred to Bundle B? Briefly explain. Bundle E has one less cheeseburger than Bundle D. What assumption(s) would still allow you to say that Bundle E is preferred to Bundle D? Briefly explain. а. b. d. Consider the utility function of individual A given by UA (X,Y) = Xº.5y0.5 in answering the items below: 2. Calculate the marginal utility for each good (MU,x & MUy) of individual A and the marginal rate of substitution (MRSxY). Interpret your computed values If Px = 0.5, Py = 1, and I = 10, solve for X*, Y*, and U* using the Lagrange a. b.…