Suppose that a consumer enjoys two goods: fries and burgers. This consumer's preferences are captured by...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Suppose that a consumer enjoys two goods: fries and burgers. This consumer's preferences are captured by the following utility function: U (F, B) = 20F0.3 30.7 where F is the quantity of fries and B is the quantity of burgers enjoyed by the consumer. Further, suppose that the price of a bag of fries is $3, the price of a burger is $6 and the consumer's budget is $100. part-a: Given these numbers, find the utility maximizing consumption bundle of this consumer. Illustrate the consumer's utility maximization problem using the budget line and the indifference curves given by the Cobb Douglas type utility function in the question. part-b: Now suppose that the price of a bag of fries increases to $4.5. Find the new utility maximizing consumption bundle and illustrate the new tangency point between the consumer's new budget line and indifference curves. part-c: Now go back to part-a of the question and assume that the price of a bag of burgers increases to $8. Again, find the new utility maximizing consumption bundle and illustrate the new tangency point between the consumer's new budget line and indifference curves. part-d: Again go back to part-a of the question. Now assume that the budget of the consumer increases to $120. Find the new utility maximizing consumption bundle and illustrate the new tangency point between the consumer's new budget line and indifference curves. Suppose that a consumer enjoys two goods: fries and burgers. This consumer's preferences are captured by the following utility function: U (F, B) = 20F0.3 30.7 where F is the quantity of fries and B is the quantity of burgers enjoyed by the consumer. Further, suppose that the price of a bag of fries is $3, the price of a burger is $6 and the consumer's budget is $100. part-a: Given these numbers, find the utility maximizing consumption bundle of this consumer. Illustrate the consumer's utility maximization problem using the budget line and the indifference curves given by the Cobb Douglas type utility function in the question. part-b: Now suppose that the price of a bag of fries increases to $4.5. Find the new utility maximizing consumption bundle and illustrate the new tangency point between the consumer's new budget line and indifference curves. part-c: Now go back to part-a of the question and assume that the price of a bag of burgers increases to $8. Again, find the new utility maximizing consumption bundle and illustrate the new tangency point between the consumer's new budget line and indifference curves. part-d: Again go back to part-a of the question. Now assume that the budget of the consumer increases to $120. Find the new utility maximizing consumption bundle and illustrate the new tangency point between the consumer's new budget line and indifference curves.
Expert Answer:
Related Book For
Posted Date:
Students also viewed these finance questions
-
Cash received from customers (LO 7) On January 1, 2014, Glass Industries' Accounts Receivable balance was $10,000; on December 31, 2014, it was $18,000. Sales revenue for the year was $145,780....
-
The following information is for Pasture Corp.: Cash received from customers ......... $65,000 Cash received from lenders ......... 20,000 Cash paid to suppliers ........... 20,000 Cash paid for new...
-
Cash flows from operating activities Cash received from customers 125000 Deduct cash payments for expenses 67500 Net cash flows from operating activities m Cash flows used in investing activities...
-
Debate on Causes of Unemployment Two economists are debating the cause of a high unemployment rate. One economist argues that there is not enough government spending. The other says high unemployment...
-
Should discussions of employee job performance be separated from salary considerations?
-
On January 22, 2001, Marlene Moffett bought a used 1998 Honda Accord from Hendrick Honda in Woodbridge, Virginia. Moffett agreed to pay $20,024.25, with interest, in sixty monthly installments, and...
-
99 percent per month. In 2014, Boling resolved his suit against the gas can manufacturer. Shortly thereafter, Prospect sent Boling a Schedule of Purchases, asserting that Boling owed Prospect...
-
Woodruff Manufacturing produces a subassembly used in the production of jet aircraft-engines. The assembly is sold to engine manufacturers and aircraft maintenance facilities. Projected sales for the...
-
Let X be a binomial random variable with the probability distribution f(x) shown below. Find the probability distribution of the random variable Y=x. f(x)= Bere 3-x x=0,1,2,3 elsewhere Complete the...
-
What is an eccentric riveted joint? Explain the method adopted for designing such a joint? A bracket, attached to a vertical column by means of four identical rivets, is subjected to an eccentric...
-
QUESTION 3 GA 5 Design the power supply that that will power one of your final year Electrical DPL2601 project. The power supply must be able to produce the output power of 12 DC and must be using...
-
Define: Foreign currency. b. The exchange rate. The U.S. interest rate differential.
-
You invested in 800 shares of stock for $49.20 a share. The initial margin requirement is 65 percent and the maintenance margin is 35 percent. What is the lowest the stock price can go before you...
-
If a firm's revenues and costs are denominated in the same currency, then they are Group of answer choices best off using forward contracts to lock in exchange rates naturally hedged best off using...
-
The cost of borrowing money, quoted as an annual percentage rate (APR), is a loan's Multiple Choice period. principal. interest. term.
-
Alanzo submits an application for a $300,000 whole life insurance policy with the help of his agent and also applies for coverage under a temporary insurance agreement (TIA). His health status is...
-
OANDA Project Here is the platform that we will be using. www.oanda.com Online Forex Trading & Forex Broker | OANDA We need to familiarize ourselves with the OANDA FX trading platform. We need to set...
-
A survey of 70 college freshmen asked whether students planned to take biology, chemistry, or physics during their first year. Use the diagram to answer each question. How many of the surveyed...
-
Thomas Corporation makes bicycles. It has always purchased its bicycle tires from the Firelock Company at $12 each, but is currently considering making the tires in its own factory. The estimated...
-
The following information is available for Chads Chocolates: Actual production....... 2,800 boxes Budgeted production ...... 3,200 boxes Standard direct labor hours... 3 DLH per box Actual direct...
-
Bob Jones owns a catering company that prepares banquets and parties for individual and corporate functions throughout the year. Jones's business is seasonal, with a heavy schedule during the summer...
-
Describe a job in which you think an employee recognition program might be an effective means for changing and improving employee behaviour. Explain how you would design the program and how you would...
-
Describe a situation in which you think an employer could use organizational behaviour modification and an employee recognition program to improve or correct employee behaviour. Can you anticipate...
-
A supervisor in a textile factory observes that one of her employees is violating a safety rule that could result in severe injury. What combination of reinforcement, punishment, and extinction could...
Study smarter with the SolutionInn App