The price Peter receives for each hour of tutoring increases to 30€. Peter decides tob.work:Just as much. The income effects leads him to want to work more, the substitution effect leads him to wantto work less, but they cancel each other.Just as much. The income effect leads him to want to work less, the substitution effect leads him to want towork more, but they cancel each other.More hours. The absolute value of the income effect is higher than that of the substitution effect and thus hewants to work more.More hours. The absolute value of the substitution effect is higher than that of the income effect and thus hewants to work more.Less hours. The absolute value of the income effect (which is negative) is higher than that of thesubstitution effect (which is positive) and thus he wants to work less.Less hours. The absolute value of the substitution effect (which is negative) is higher than that of theincome effect (which is positive) and thus he wants to work less. 4.Peter's utility function is equal to: U (L, C) = LVC where L is hours of leisure time per day and C is dailyconsumption, denoted in €.When he is looking for a job as a consultant he finds the following possibilities:i) Working for "ABC of M", where he may get 100€ per day and 2h of leisure time per dayii) Working for "101 of M", where he may get 25€ per day and 4h of leisure per dayiii) Working for "M for Dummies", where he may get 50€ per day and 3h of leisure per dayEach day, apart from sleeping and other basic necessities, Peter has 15 hours of available time. He may tutor during asmany hours as he desires, receiving 20€ per each hour of work.Assume Peter cannot save and consumes all he receives.a.How many hours does Peter decide to rest?9h10h11h15h13.5h

Peter is a utility-maximizing individual. His daily utility function is given as follows:It is also…

Peter's utility function is equal to: U (L, C) = L√C where L is hours of leisure time per day and C is daily consumption, denoted in €. When he is looking for a job as a consultant he finds the following possibilities: i) Working for "ABC of M", where he may get 100€ per day and 2h of leisure time per day ii) Working for "101 of M", where he may get 25€ per day and 4h of leisure per day iii) Working for "M for Dummies", where he may get 50€ per day and 3h of leisure per day Each day, apart from sleeping and other basic necessities, Peter has 15 hours of available time. He may tutor during as many hours as he desires, receiving 20€ per each hour of work. Assume Peter cannot save and consumes all he receives. How many hours does Peter decide to rest? a. 9h 10h 11h 15h 13.5h

Peter's utility function is equal to: U (L, C) = L√C where L is hours of leisure time per day and C is daily consumption, denoted in €. When he is looking for a job as a consultant he finds the following possibilities: i) Working for "ABC of M", where he may get 100€ per day and 2h of leisure time per day ii) Working for "101 of M", where he may get 25€ per day and 4h of leisure per day iii) Working for "M for Dummies", where he may get 50€ per day and 3h of leisure per day Each day, apart from sleeping and other basic necessities, Peter has 15 hours of available time. He may tutor during as many hours as he desires, receiving 20€ per each hour of work. Assume Peter cannot save and consumes all he receives. How many hours does Peter decide to rest? a. 9h 10h 11h 15h 13.5h

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Aisha is considering how to allocate the next 6 hours of her free time. She could choose between leisure (L) and helping her neighbour with the house chores. If she decides to help her neighbour, she is going to get paid at £25 per hour, which she can then spend on her favourite pizza (P). Suppose the price of pizza is £12.50. Aisha's preferences for leisure and pizza are given by the following utility function: U(L, P) = 3L + P. (MUL = 3, MUp = 1). a) Write down Aisha's budget equation and draw the corresponding budget line. Clearly label the axes and calculate the coordinates of the points of intersection of the budget line with each axis. b) Calculate Aisha's marginal rate of substitution between leisure and pizza. Explain the concept of MRS and interpret the figure obtained. c) Find Aisha's optimal consumption bundle, both algebraically and graphically. Explain your reasoning. d) Would Aisha's optimal choice change if she could get a discount on her pizza purchases so that each…
1. For the utility function U(x,, x2) = x9.4x9.6, calculate EV, Cv and ACS for an increase in P1 from $1 to $2. Assume p2 1, and m = 100.
Aisha is considering how to allocate the next 6 hours of her free time. She could choose between leisure (L) and helping her neighbour with the house chores. If she decides to help her neighbour, she is going to get paid at £25 per hour, which she can then spend on her favourite pizza (P). Suppose the price of pizza is £12.50. Aisha's preferences for leisure and pizza are given by the following utility function: U (L, P) = 3L + P. (MUL = 3, MUp = 1). a) Write down Aisha's budget equation and draw the corresponding budget line. Clearly label the axes and calculate the coordinates of the points of intersection of the budget line with each axis. d) Would Aisha's optimal choice change if she could get a discount on her pizza purchases so that each pizza would cost £5? Explain. e) Would Aisha's optimal choice change (as compared to c), if she could get a discount on her pizza purchases so that each additional pizza beyond the first two, cost £5? (In other words, the first two pizzas need to…
EXERCISE 7 Aisha is considering how to allocate the next 6 hours of her free time. She could choose between leisure (L) and helping her neighbour with the house chores. If she decides to help her neighbour, she is going to get paid at £25 per hour, which she can then spend on her favourite pizza (P). Suppose the price of pizza is £12.50. Aisha's preferences for leisure and pizza are given by the following utility function: U(L, P) = 3L + P. (MU₁ = 3, MUp = 1). a) Write down Aisha's budget equation and draw the corresponding budget line. Clearly label the axes and calculate the coordinates of the points of intersection of the budget line with each axis. b) Calculate Aisha's marginal rate of substitution between leisure and pizza. Explain the concept of MRS and interpret the figure obtained. c) Find Aisha's optimal consumption bundle, both algebraically and graphically. Explain your reasoning. d) Would Aisha's optimal choice change if she could get a discount on her pizza purchases so…
Max is very peculiar about his morning coffee routine. He likes to use exactly two spoons of coffee for every six ounces of water. This give him the following utility function: U = min(2Water, 6Cof fee), where Water (W) is measured in fluid ounces and Coffee (C) in spoons. (a) afford while utility-maximizing? How many spoons of coffee does he use in doing so? (b) If he spends exactly $2 on coffee every morning, how many 8 ounce cups of coffee can he How much utility does Max get from his morning cup/s of coffee?
5.3 (0) Ambrose, the nut and berry consumer, has a utility function U(21,x2) = 4/T +x2, where ¤; is his consumption of nuts and r2 is his consumption of berries. %3D (a) The commodity bundle (25,0) gives Ambrose a utility of 20. Other points that give him the same utility are (16, 4), (9, ), (4, - ), (1, –), and (0, ). Plot these points on the axes below and draw a red indifference curve through them. (b) Suppose that the price of a unit of nuts is 1, the price of a unit of berries is 2, and Ambrose's income is 24. Draw Ambrose's budget line with blue ink. How many units of nuts does he choose to buy? (c) How many units of berries? (d) Find some points on the indifference curve that gives him a utility of 25 and sketch this indifference curve (in red). (e) Now suppose that the prices are as before, but Ambrose's income is 34. Draw his new budget line (with pencil). How many units of nuts will he choose? How many units of berries?
4. Minnie enjoys dessert by eating chocolate cake (C) and apple pie (P) according to the utility function U = Min [C, P]. In any given week, Minnie %3D spends £20 to purchase these two products. Assume that Minnie is a utility maximiser and has to pay 50p for a unit of apple pie and £2 for a unit of chocolate cake. (i) Consider the bundle C = 20 and P = 5. Is this the utility maximizing choice subject to Minnie's budget?. %3! (ii) Suppose that Minnie chooses the exact bundle that maximizes her utility. How would the utility maximizing choice of C be affected if price of P went up? (iii) Explain under which conditions the tangency condition does not work. Given that the tangency condition does not work, discuss how we can find out the optimal consumption bundle for a consumer.
Aisha is considering how to allocate the next 6 hours of her free time. She could choose between leisure (L) and helping her neighbour with the house chores. If she decides to help her neighbour, she is going to get paid at £25 per hour, which she can then spend on her favourite pizza (P). Suppose the price of pizza is £12.50. Aisha’s preferences for leisure and pizza are given by the following utility function: . U(L,P)= 3L + P MU(L)= 3 MU(P)=1 Write down Aisha’s budget equation and draw the corresponding budget line. Clearly label the axes and calculate the coordinates of the points of intersection of the budget line with each axis. Calculate Aisha’s marginal rate of substitution between leisure and pizza. Explain the concept of MRS and interpret the figure obtained. Find Aisha’s optimal consumption bundle, both algebraically and graphically. Explain your reasoning. Would Aisha’s optimal choice change if she could get a discount on her pizza purchases so that each pizza would cost…
Summer break is approaching! Suppose you derive utility from days spent traveling on vacation domestically, D, and days spent traveling on vacation in a foreign country, F. Your utility function over these two “goods” is: U(D, F) : 4D0.25F 0.75 Let your budget constraint be I(D, F) = pDD + pF F; where I is your income, pD is the price of domestic travel per day, and pF is the price of foreign travel per day. a. Determine the demand functions for domestic travel and foreign travel. Make sure you show your work – show the steps used. b. Suppose that you’ve saved $800 for your summer travel, the price of domestic travel per day is $25 and the price of foreign travel per day is $100. How many days of each type of travel will you embark on? c. Illustrate the indifference curve, budget constraint, and the utility maximizing bundle associated with (b). Make sure you show the level of utility, the budget constraint intercepts, and the optimizing equilibrium.
3. Suppose Mary enjoys Pepsi and Coke according to the functionU(P;C) = 4C + 5P. What does her utility function say about her MRS of Coke for Pepsi? What do her indi§erence curves look like? What type of goods are Pepsi and Coke for Mary? If Pepsi and Coke each cost $1 and Mary has $20 to spend on these products, how many units of each product should she buy in order to maximize her utility? Show this utility maximiz- ing combination combination of Pepsi and Coke on the graph. how would her consumption and utility maximizing bundle of Coke and Pepsi change if the price of Coke decreases to 50 cents. 4. Vera is an impoverished graduate student who has only $100 a month to spend on food. She has read in a government publication that she can assure an adequate diet by eating only peanut butter and carrots in the Öxed ratio of 2 pounds of peanut butter to 1 pound of carrots, so she decides to limit her diet to that regime. a) If peanut butter costs $4 per pound and carrots cost $2 per…
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.
The utility function for Morris is U = min {AM, T}, where M is pints of milk and T is cans of tuna. Morris has S90 to spend or tuna (prices at $2 per can) and milk (priced at $1 per pint). What is Morris's utility-maximizing consumption bundle? 1)M = 40 and T= 25 2)M= 15 and T= 65 3)M= 10 and T= 40 4)M= 30 and T= 30