Sandra's preferences over consumption bundles (x, y) are summarized by the following utility function: u (x1,...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Sandra's preferences over consumption bundles (x, y) are summarized by the following utility function: u (x1, x2) = 16x-2x² + 4y, where x is the amount of good x that Sandra consumes and y is the amount of good y that Sandra consumes. Let p. and py be the prices of goods x and y, respectively. Let me be Sandra's income. Sandra's goal is to maximize her utility subject to her budget constraint. [40 marks] a. Find an algebraic expression for Sandra's marginal rate of substitution between goods x and y. Show your work. In addition, give a concise explanation of the meaning of the marginal rate of substitution. 2 AV2022/23 Semester 1 b. Suppose that p. - py-2 and m= 24. Use your answer from part (a) to determine Sandra's optimal consumption bundle. Show your work. c. Suppose now that p. increases to 6, while p, and m remain the same. What are Sandra's optimal choices for x and y in this case? Is Sandra better or worse off than she was in part (b)? Explain. d. How much extra income must Sandra be given in order to compensate her for the increase in the price of good x in part (c)? Explain. Sandra's preferences over consumption bundles (x, y) are summarized by the following utility function: u (x1, x2) = 16x-2x² + 4y, where x is the amount of good x that Sandra consumes and y is the amount of good y that Sandra consumes. Let p. and py be the prices of goods x and y, respectively. Let me be Sandra's income. Sandra's goal is to maximize her utility subject to her budget constraint. [40 marks] a. Find an algebraic expression for Sandra's marginal rate of substitution between goods x and y. Show your work. In addition, give a concise explanation of the meaning of the marginal rate of substitution. 2 AV2022/23 Semester 1 b. Suppose that p. - py-2 and m= 24. Use your answer from part (a) to determine Sandra's optimal consumption bundle. Show your work. c. Suppose now that p. increases to 6, while p, and m remain the same. What are Sandra's optimal choices for x and y in this case? Is Sandra better or worse off than she was in part (b)? Explain. d. How much extra income must Sandra be given in order to compensate her for the increase in the price of good x in part (c)? Explain.
Expert Answer:
Answer rating: 100% (QA)
Step 12 1 MRS MUx MUy 16 4 x 4 4x MRS is the rate at which an individual is willing to gi... View the full answer
Related Book For
Posted Date:
Students also viewed these mathematics questions
-
A university department head has five instructors to be assigned to four different courses. All the instructors have taught the courses in the past and have been evaluated by the students. The rating...
-
A shop has four machinists to be assigned to four machines. The hourly cost of having each machine operated by each machinist is as follows: However, because he does not have enough experience,...
-
A plant has four operators to be assigned to four machines. The time (minutes) required by each worker to produce a product on each machine is shown in the following table. Determine the optimal...
-
Make a presentation about marketing: Your Companys marketing department promotes the products and interacts with the customers, sales force, and supply chain. They are also in charge of forecasting...
-
Red Cap Ltd. uses a perpetual inventory system. It recorded the following inventory transactions during 2011:. Required: a. Calculate the cost of goods sold and gross profit for Red Cap Ltd. for 2011...
-
Sheba, Inc. produces custom-made winter coats for pets. During December, management determined the following facts all relating to Job 22: Total production 300 jackets Abnormal spoilage 16 jackets...
-
On December 31,2010, the Accounts Receivable balance of Alterations Express is $300,000. The Allowance for Uncollectible Accounts has a $3,900 credit balance. Alterations prepares the following aging...
-
What is meant by the term transferred-out cost? Why does the transferred-out cost under the WA method include only one computation but the FIFO method includes multiple computations?
-
Let's look at total asset turnover in Exhibit 10.19 for two competing companies: Starbucks and Jack in the Box. To show how we use total asset turnover, let's look at Starbucks. We express...
-
Derive the system of differential equations describing the straight-line vertical motion of the coupled springs shown in Figure 7.6.6. Use the Laplace transform to solve the system when k 1 = 1, k 2...
-
Which mode of transportation is best for carrying perishable goods to distant markets? a. railroads b. air carriers c. pipelines d. e. trucks water carriers
-
6. We have two coins in a box, namely Coin 1 and Coin 2. If we toss Coin 1, its probability of head is 0.9 and probability of tail is 0.1. Coin 2 is a fair coin, i.e., it has 50% chance of head and...
-
A 7 5 0 N parachute instructor floats to earth at a steady 8 . 0 m / s while being supported by two identical parachutes. What is the magnitude of the drag force each chute provides?
-
Choose from the following topics to create discussion: Humanity and the Natural Environment Housing and Home Furnishings Privacy and Socializing
-
Required information [The following information applies to the questions displayed below.] Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000...
-
Cullumber Company makes 2 products, sleep masks and sleep socks. Additional information follows: Sleep Masks Sleep Socks Units 6,500 5,000 Sales $ 135,000 $ 100,000 Variable costs 61,030 32,000 Fixed...
-
Consolidated Results of Operations for the Years Ended December 31 (Dollars in millions except per share data) STATEMENT 3 Consolidated Financial Position at December 31 Caterpillar Inc. 2822 2021...
-
Provide examples of a situations in which environmental disruptions affected consumer attitudes and buying behaviors.
-
The members of the Vistas Club are planning a month long hiking and camping trip through the Blue Ridge Mountains, from north Georgia to Virginia. There are a number of trails through the mountains...
-
The Barrett Textile Mill is remodeling its plant and installing a new ventilation system. The possible ducts connecting the different rooms and buildings at the plant, with the length (in feet) along...
-
Annabelle Sizemore has cashed in some treasury bonds and a life insurance policy that her parents had accumulated over the years for her. She has also saved some money in certificates of deposit and...
-
Which of the following liabilities creates no expense accrual for the company? a. Interest b. Sales tax c. Employment Insurance d. Warranty
-
Megatron Inc. owns a small television station in the interior of British Columbia. Its year-end is June 30. The company completed the following transactions: Required 1. Record the above transactions...
-
Suppose Super Tires estimates that warranty costs will equal 1 percent of tire sales. Assume that November tire sales totalled \(\$ 900,000\), and the company's outlay in replacement tires and cash...
Study smarter with the SolutionInn App