5. Use consumer theory (i.e. indifference curves and budget constraints), where the usual assumptions apply, to illustrate the following: Assume the individualâ??s utility is an increasing function of medical goods (m) and all other goods (X). That is, Utility =U (m,x) where delta u/delta m >0, delta u/delta x >0 , and
What would be the consumer buying response to Coca-Cola if the price of Pepsi doubled? If the prices of Coca-Cola and Pepsi remained constant, what would be the consumer's typical buying response to these products if their income was reduced by 30%? Suppose all carbonated beverages tripled in price. How would the concep
Please see the attachment. Mark Goldsmith's broker has shown him two bonds. Each hasa maturity of 5 years, a par value of $1,000.00, and a yield rate to maturity of 12%. Bond A has coupon interest rate of 6% paid annually. Bond B has a coupon interest rate of 14% paid annually. A. Calculate the selling price for each
You are choosing between two goods, X and Y, and your marginal utility from each is as shown below. if your income is $9 and the price of X and Y are $2 and $1, respectively, Units of X Marginal Utility for X 1 10
In state of nature 1 the individual has income w, whereas in state of nature 2 the individual's income is y < w. The probabilities that these states will occur are (1 - p) and p, respectively. The individual can purchase insurance before the state of nature is known; an increase in income of s in state 2 can be purchased by a re
The concept of utility and marginal utility can also be applied to income. Please read a summary of three political philosphies in Section 3: The Political Philosphy of Redistribution Income Utilitarianism was founded by the English philosophers John Stuart Mill and Jeremy Bentham. Liberalism was developed by John Rawls (1971
Sam enjoys collecting old editions of microeconomic theory books. Unfortunately, he has no income from employment, but he does accept bags of trash to be buried in his yard for a fee. Suppose the price of each old edition microeonomic book is $2, and San charges $1 for each bag of trash. Sam's utility is given by: U = min(2B, 20
73. Joseph Gallo relates that he poured two glasses of wine from the same bottle and put a price of 10 cents a bottle on one and 5 cents a bottle on the other. He let people test both and asked them which they wanted. Most wanted the 10-cent bottle, even though they were the same one. a. What does it tell us about people? b. Ca
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Zelmer Company uses budgets in controlling costs. The August 2008 budget report for the company's Assembling Department is as follows. ZELMER COMPANY Budget Report Assembling Department For the Month Ended August 31, 2008 Difference Favorable F Manufacturing Costs Budget Actual Unfavorable U Vari
The management of Borealis Manufacturing Company is trying to decide whether to continue manufacturing a part or to buy it from an outside supplier. The part, called WISCO, is a component of the company's finished product. The following information was collected from the accounting records and production data for the year e
Need some help writing a paper...on how the below game should be set up, played and solved... a consumer decide whether to buy life insurance or not. To keep the game relatively simple, assume the life insurance being considered is term life, i.e. insurance without an accumulating investment value. Keep in mind that your p
1. Use the ideas of consumer surplus and producer surplus to explain why economists say competitive markets are efficient. Why are below- or above-equilibrium levels of output inefficient, according to these two sets of ideas? 2. Suppose the cross elasticity of demand for products A and B is +3.6 and for products C and
'The Theory of Individual Behavior', is devoted to the use of indifference analysis to build a framework for demand theory. Indifference analysis goes to great lengths to explain consumer behavior and how consumers make choices between options available to them. The options they face include budget constraints, different prefe
What is meant by the term "utility" and how does it relate to purposeful behavior?
1. A firm will only earn normal profit in the long run a. if firms can freely enter or leave the market b. if firms do not try to maximize profit c. only if the industry is perfectly competitive d. whenever products are not differentiated 2. Under which of the following market conditions is it most difficult to maintai
Please see attachment. 1. Explain the difference between investing and saving. 2. List, and explain, three motivations for investing. 3. Using automobiles as an analogy, explain the difference between the primary market and secondary market. 4. Tom has come to you for some help in organizing his affairs. He has suppl
1. To say that you can't have too much of a good thing means that for any good that you enjoy (say pizza), a. higher consumption will always lead to greater utility b. higher consumption will cause utility to increase at an increasing rate c. higher consumption will increase utility but only up to a point; after that utilit
The political philosophy of redistributing income: Utilitarianism Utilitarianism: the political philosophy according to which the government should chose policies to maximize the total utility of everyone in society. Liberalism Liberalism: the political philosophy according to which the government should chose policie
Q1: Exercise and Total Utility The table below shows a consumer's total utility from consuming hours of exercise at the gym. Given this information, what can be said about this consumer's marginal utility curve for exercise? A) Marginal utility initially decreases, but eventually increases as more exercise is consumed.
Income and substitution effects 1.The income effect indicates that: A)a rise in money income will cause consumers to buy smaller quantities of normal goods. B)when the price of a product falls, the lower price will induce the consumer to buy more of that product now that it is relatively cheaper. C)consumers should subs
Please answer by choosing one of the multiple choice answers. Answer the following 1.Scarcity 1.exists because people have wants that are unlimited relative to the availability of resources to satisfy those wants 2.creates a need for society to allocate goods according to some set of criteria 3.means tha
I have attached the problem below.
An expected utility maximizing individual has utility of eno-of-period wealth given by u(W)= W^(1-y)-1, if y is not equal to 1 ln(W), if y=1 1. Show that this individual has constant relative risk aversion and decreasing absolute risk aversion. 2. Consider the special case where y=2. Suppose that this individu
Question 11: Surplus is a condition of: 1.excess supply 2.a deficiency in supply 3.market equilibrium 4.excess demand Question 12 : The effect on sales of an increase in price is a decrease in: 1.the quantity demanded 2.demand 3.supply 4.the quantity supplied Question 13: Th
Portfolio selection using the utility function u(w)=-exp(-bw).
An individuals preferences over goods x=(x1,x2) can be represented by the following utility function: u(x)= ln(x1-b)+ ln(x2) The individual faces prices p=(p1,p2)>>0 and has income m>p1b>0 Why is it important that m>p1b? What is the interpretation of the coefficient b? Do the demand function
A consumer can live up to two periods, but is uncertain about surviving to period 2. How is his/her optimal consumption choice affected? What if he/she can survive to the next period with certainty, but might need to pay to get well? How much will he/she insure if insurance is actuarially fair? How does his/her insurance coverage relate to such concepts as equivalent variation and compensating variation? Please see the long description for exact statement of this problem.
Suppose that individuals potentially live for two periods. The utility function in each period is given by: u(ci)= c^(1/2) where ci is period i's consumption. Every individual receives income m, in the first period. This income can be used to finance consumption in that period, or it can be saved at zero interest to fin
Discussion Question - What is the diminishing marginal concept? Is there a parallel between diminishing marginal utility in consumption and diminishing returns in production?
Answer the following question in your own words without quoting anyone: What is the diminishing marginal concept? Is there a parallel between diminishing marginal utility in consumption and diminishing returns in production? Describe any similarities you see.
1. A consumer is at equilibrium at one of the 4 points (A, B, C, or D) shown in Figure 1 (attached to this assignment). a. If we know that the consumer is maximizing his/her utility, and that the price of Skittles is not the same as the price of M&M's, at what point is the consumer operating? Explain your logic. b. If the pric