Suppose consumer are always ready to trade k units of good X for w Then, I poo8 10 X and Y are goods and indifference curve is bowed inward towards origin X and Y are goods and indifference curves are lines since marginal rate of substitution is constant
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- Suppose that the following utility function is given U(X,Y) = -X-ywhich of the following is correct? X is a good and Y is a bad and indifference curve is negatively sloped. Both X and Y are goods and indifference curve is negatively sloped. Both X and Y are bads and indifference curve is negatively sloped, OYisa good and X is a bad and indifference.curve is positively sloped.When the price of one'good Increases and the price of the other goot and income are held constant, the budget line Select one: rotates so that the intercept is farther from the origin on the axis representing the good that has experienced an increase in price shifts parallel to the original budget line so that the new budget line is closer to the origin b. rotates so that the intercept is closer to the origin on the axis representing the good that has experienced an increase in price C. d shifts parallel to the original budget line so that the new budget line is farther from the origin CLEAR MY CHOICEHow a demand curve can be derived with budget constraint- indifference curve framework? Explain
- Which of the following statements is not true?A) If tea and coffee are perfect substitutes in your consumption, then you will only consumethe good with the lowest price.B) If tea and coffee are perfect substitutes in your consumption, then you will consume somequantity of both goods if the prices of tea and coffee are equal.C) You view coffee and donuts as perfect complements, and the corners of your indifferencecurves follow the 45-degree line. As long as your income and the prices of coffee and donutsare positive, you will not choose a corner solution.D) You view coffee and donuts as perfect complements, and the corners of your indifferencecurves follow the 45-degree line. You will consume coffee and donuts at some point alongthe 45-degree line where your MRS equals the price ratio for the two goods.Elaborate substitution effect and income effect in case of inferior goods graphically.A KU student maximizes his sporting utility by playing Golf (G) and Tennis (T). His function is given as: U(G,T) = G + T Graphically characterize the student’s indifference curve. What is the Marginal Rate of Substitution between Golf and Tennis What is the behaviour of the Marginal Rate of Substitution for these type of goods.
- Derive the relationship between the quantity of X demanded and the price of X if the consumer’s indifference map vis-à-vis X and Y has curves concave to the origin. Let X be games of golf per annum and Y all other goods. Draw the indifference map and budget constraint of: (a) an amateur who pays to play golf; (b) a professional who is paid to play golf. May we conclude that golfers turn professional because they dislike the game?The utility-maximizing bundle of x and x2may, in some instances, be found at a point of tangency between the budget line and an indifference curve. In other instances, the utility-maximizing bundle will be found at a corner point-that is, where the quantity consumed of one good is zero. For which types of indifference curves shown below will the utility-maximizing bundle definitely be found at a corner point? Choose one or more: A. B. "C. D.a) Assume that an individual consumes two goods, and achieves the benetby çonsuming respectively 1 x and x units of each of the goods. Define the terms indifference curve and budget condition, and show the consumer benefit-maximizing good combination in a chart. Explain why this one the combination solves the utility maximization problem. b) Assume that the preferences of the consumer can be expressed by the utility function W),4 + X, 2 and that the price per unit x 1 is p =, the price per unit x 2 is 2 p= and that the income ( m ) is 200. Find the consumer's optimal choice in this case.
- (1) For each of the three Indifference Curve Maps, what can you infer about the relationship of the goods? What about its substitutability? Provide an example pair of goods for each a) Ug U2 a) Uz QxSuppose consumers use k units of good X and w units of good Y in fixed proportion. Then, OX and Y are goods and indifference curve is bowed inward towards origin OX and Y are perfect substitutes and indifference curve is bowed inward towards origin. OX and Y are goods and indifference curves are lines since marginal rate of substitution is constant. X and Y are perfect complements and indifference curves are L shaped1. Assume well behaved preferences for a consumer. If total income goes up, ceteris paribus what would be the impact on the Budget line? 2. Assume well behaved preferences for a consumer. If total price of good on Y axis goes up, ceteris paribus what would be the impact on the Budget line? 3. Differentiate between the concept of Income effect and Substitution effect in Price Decomposition
