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If 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
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Solved in 4 steps with 1 images
- 1. What is the Total Utility of the second unit? 2. What is the Marginal utility of the third, fourth and the fifth unit? 3. Explain the relationship between Total Utility and Marginal Utility. 4. At which rate is total utility increasing: a constant rate, a decreasing rate, or an increasing rate? How do you know? 5. “It is possible that a rational consumer will not purchase any units of the product represented by these data.” Do you agree? Explain why or why not. 6. In the last decade or so there has been a dramatic expansion of small retail convenience stores (such as 7 Eleven, Kwik Shop, and Circle K), although their prices are generally much higher than prices in large supermarkets. What explains the success of the convenience stores?1. What is the Total Utility of the second unit? 2. What is the Marginal utility of the third, fourth and the fifth unit? 3. Explain the relationship between Total Utility and Marginal Utility. 4. At which rate is total utility increasing: a constant rate, a decreasing rate, or an increasing rate? How do you know? 5. “It is possible that a rational consumer will not purchase any units of the product represented by these data.” Do you agree? Explain why or why not. 6. In the last decade or so there has been a dramatic expansion of small retail convenience stores (such as 7 Eleven, Kwik Shop, and Circle K), although their prices are generally much higher than prices in large supermarkets. What explains the success of the convenience stores? ****FIRST 3 SUB-PARTS ANSWERED ALREADY ONLY NEED LAST 3****If we have money, we buy goods and services to satisfy our needs. In economics, thesatisfaction that we get from the consumption of goods and services is called utility. Usea utility graph to explain what happen to the utility when you keep on increasing thenumber of units consumed. Also explain what happens to the utility when you keep onincreasing the number of units consumed. Also explain what happens to the additionalutility (i.e. additional satisfaction) when you increase your consumption by one unit
- Units of the Good 0 1 5678AWN2 3 4 Total Utility Total Utility of X of Y 0 0 620 1740 1120 3030 1500 3960 1820 4710 2080 5280 2300 5730 2460 6060 2580 6300 For the next 3 questions, assume that an individual consumes two goods X and Y. The total utility (assumed measurable) of each good is independent of the rate of consumption of other goods. The prices of X and Y are, respectively, $20 and $30. If the consumer buys the fourth unit of X the Marginal Utility per Dollar Spent on X is 16 I If the consumer has $210 to spend on X and Y, the utility-maximizing bundle is The minimum budget necessary to move to a higher equilibrium consumption of X and Y is $ unit(s) of X and unit(s) of Y.PROBLEM You are choosing between two goods, X and Y, and your MU from each is shown in the table below. Assume that, other things remaining unchanged, the price of X falls to $1. What quantities of X and Y will you now purchase? Using the two prices and quantities of X, derive a demand curve for X. 5. If your income is $9 and the prices of X and Y are $2 and $1, respectively, what maximum total utility for products X and Y that will you realize? Use a number, no decimal value, no commas, no space, no unit of measurement. 6. Assume that, other things remaining unchanged, your income is $9 and the prices of Y is $1, and the price of product X falls to $1. How many units of product X will you purchase to maximize utility? Use a number, no decimal value, no commas, no space, no unit of measurement. please answer all questions. Thanks5. The price of good x increases from 4 to 6. A consumer with an income of 120 buys 15 units of good x before the change and 10 units after. If the same consumer kept their utility constant and minimized expenditure, they would buy 8 units of x after the price change. What are the total effect, substitution effect, and income effect?
- 3. Tony is throwing a party at his Fraternity and is trying to choose what booze to buy. A bottle of vodka has three times the alcohol as a six-pack of beer. Assume that Tony only cares about the total amount of alcohol in his basket. (use vodka on the X-axis and beer measured in six-pack on the Y-axis) a) Devise a utility function to represent these preferences. b) Suppose a bottle of vodka costs $40, a six-pack of beer costs $10, and the budget is $200. Write the budget constraint. c) Solve Tony's utility maximization problem and find the optimal combination. d) Suppose that a bottle of vodka cost has increased to $50. What will be his new optimal combination?Total utility O diminished as the quantity of a good increases increases as long as more goods are acquired increases as long as marginal utility increases O increases as long as marginal utility is positive diminishes as consumption of some good rises1..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 explanations
- 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 ||||| ||||| |||Question 5 Andrew is currently spending all his income on 2 goods, burgers and Pepsi. He buys burgers at 4 L.E. a unit, with a total utility of 1000 and a marginal utility of 24. He buys Pepsi at 1 L.E a unit with a total utility of 800 and a marginal utility of 18. In order of reach consumer equilibrium, he should consume: The same amount of burgers and Pepsi. More Pepsi but the same amount of burgers. More Pepsi and less burgers. More burgers but the same amount of Pepsi. More burgers and less Pepsi.1. Suppose Frank enjoys traveling and his utility is a function of the number of airplane trips he takes and the number of bus rides he takes. His utility function is given by U(b,p) = 3b0-4p0.8. A trip on a plane costs $400, a trip on the bus costs $50 and Frank has $3,000 to spend on travel. a. Draw Frank's budget line on a graph with bus trips on the vertical axis. b. Calculate AND INTERPRET the slope of Frank's budget line. c. Draw a representative indifference curve on your graph and provide a function that describes the slope of this indifference curve (i.e., find Frank's marginal rate of substitution). What is the INTERPRETATION of the marginal
