Bridget has a limited income and consumes only wine and cheese; her current consumption choice is four bottles of wine and 10 pounds of cheese. The price of wine is $10 per bottle, and the price of cheese is $4 per pound. The last bottle of wine added 50 units to Bridgetâ??s utility, while the last pound of cheese added 40 un
Figure 6.1 is used to analyse the goals of a union (in terms of wage goals and employment goals) and figure 6.3 is used to provide an explanation union utility maximization when choosing between the goals employment and wages. Question I want to be able to explain why unions are likely to differ from each other in the goa
An indirect utility function is, among other properties, zero-degree homogeneous in the prices and nominal income. That is, if you scale up each price and nominal income in the same positive proportion t, indirect utility remains unchanged. Explain why this is true. (Hint: real income remains constant). Now demonstrate t
Using the economists' model of individual choice (comparing the marginal costs and marginal benefits of a choice, incorporating the level of satisfaction or "utility" we derive from the choice, and considering the relative MU/P of a good we buy to that of another), choose, and explain your motivation for four personal decisions
Prove that a diminishing marginal rate of substitution neither implies nor is implied by diminishing marginal utility.
What does the concept of utility mean to you?
1) Explain how a price change is affected by (a) the substitution effect, (b) the income effect. 2) If someone is very thirsty and drinks five glasses of water, explain how the principle of the diminishing marginal utility is related to drinking each glass of water. 3) Explain the relationship between the ratio of marginal
1. Joe is currently unemployed and without health insurance coverage. He derives utility (U) from his interest income on his savings (Y) according to the following function: U = 5(Y1/2) Joe presently makes about $40,000 of interest income per year. He realizes that there is about a 5 percent probability that he may suffer
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
Define consumer surplus. Explain relationship between consumer surplus, marginal utility, and market demand. PLEASE DO NOT CITE WIKIPEDIA, ENCARTA, OR WORLDBOOK FOR REFERENCES
Explain the difference between utility maximization from the consumption of a free good versus a good that is not free.
A rural utility company provides standby power to pumping stations using diesel-powered generators. An alternative has arisen whereby the utility could use a combination of wind and solar power to run its generators, but it will be a few years before the alternative energy systems are available. The utility estimates that the ne
Suppose the following table reflects total satisfaction (utility) derived from eating pizza... a. What is the marginal utility of each pizza? b. What causes the marginal utility to diminish? Please show work.
Bridget has a limited income and consumes only wine and cheese, her current consumption choice is four bottles of wine and 10 pounds of cheese. The price of the wine is $10 per bottle, and the price of cheese is $4 per pound. The last bottle of wine added 50 units to Bridget's utility, while the last pound of cheese added 40 u
** Please see the attached file for a PDF formatted copy of the problem description ** Two consumers each have an income of $300, with which they buy good X (costing $5) and good Y (costing $4). If A's preferences are given by U_A = X^2 Y and B's preferences are given by U_B = X(Y+100), what is the optimal amounts of X and Y
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
Using the following information, calculate total utility and marginal utility. A. Plot the total utility curve B. Plot marginal utility directly below total utility C. At what marginal utility value does total utility reach at maximum? Number of utils for the first unit 300 Number of utils for the second unit
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
A manager has a utility function U = C 0.5 if she does not work hard and U = C 0.5 - 3 if she does. Expected profit will increase from 1,000 to 1,500 if she works hard. The manager receives compensation C equal to 144 plus a portion x of any profit in excess of 1,000. What is the value of x that will make the manager indifferent
A manager has a utility function U = C 0.5 if she does not work hard and U = C 0.5 - 1 if she does. Expected profit will increase from 1,400 to 1,600 if she works hard. The manager receives compensation C equal to 82 plus a portion x of any profit in excess of 1,400. What is the value of x that will make the manager indifferent
If you take away $1 from a rich person and give it to a poor person, the rich person loses less utility than the poor person gains. Agree or disagree. Defend your answer with economic principles and the reasons why.
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
Your bank is developing a marketing campaign to appeal to new customers. In a meeting, your manager asked the following question: "Do individuals have any other economic responsibility rather than to maximize their own utility?" How would you respond to this question? How might the bank tie in the concept of utility maximization
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
Bridget has a limited income and consumes only wine and cheese; her current consumption choice is four bottles of wine and 10 pounds of cheese. The price of wine is $10 per bottle, and the price of cheese is $4 per pound. The last bottle of wine added 50 units to Bridget's utility, while the last pound of cheese added 40 units
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
Economics Problem: Prove Roy's identity and use it to derive and interpret the Slutsky equation. Make sure to show all of your work.
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