Sarah has preferences that satisfy all the regular assumptions over the goods x and X2. She...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Sarah has preferences that satisfy all the regular assumptions over the goods x and X2. She has an income of 80 dollars and faces the prices pr-2 and p2-8 respectively. a) Suppose Sarah's preferences can be represented by the utility function U(x₁, x₂) = min [x₁,x₂]. What are Sarah's optimal choices of x, and x, at these prices and income? b) Suppose that the price of good 1 increases to 3 dollars. What is Sarah's new consumer optimum? The government would like to compensate Sarah as a result of the higher price. How much income would the government need to give Sarah so that she can just afford her original consumption bundle in a)? Describe why this is a "money-metric" measure of the welfare loss associated with the price change. Sarah has preferences that satisfy all the regular assumptions over the goods x and X2. She has an income of 80 dollars and faces the prices pr-2 and p2-8 respectively. a) Suppose Sarah's preferences can be represented by the utility function U(x₁, x₂) = min [x₁,x₂]. What are Sarah's optimal choices of x, and x, at these prices and income? b) Suppose that the price of good 1 increases to 3 dollars. What is Sarah's new consumer optimum? The government would like to compensate Sarah as a result of the higher price. How much income would the government need to give Sarah so that she can just afford her original consumption bundle in a)? Describe why this is a "money-metric" measure of the welfare loss associated with the price change.
Expert Answer:
Related Book For
Posted Date:
Students also viewed these accounting questions
-
An integrated CMOS digital circuit can be represented by the Bode diagram shown in Figure E9.5. (a) Find the gain and phase margins of the circuit. (b) Estimate how much we would need to reduce the...
-
An analog averager can be represented by the differential equation where y(t)is its output and x(t)the input. (a) If the input-output equation of the averager is Show how to obtain the above...
-
A linear dynamical system can be represented by the equations Dx / dt = A(t)x(t) + B(t)u(t), y(t) = C(t)x(t) + D(t)u(t), where A is an n n variable matrix, B is an n r variable matrix, C is an m n...
-
Ebbers Corporation overstated its ending inventory balance by $15,000 in the current year. What impact will this error have on cost of goods sold and gross profit in the current year and following...
-
From the following data, calculate the cost of capital for operations (WACC). Use the capital asset pricing model to estimate the cost of equity capital. U.S. Government long-term bond rate ..........
-
Cotner Clothes Inc. is considering the replacement of its old, fully depreciated knitting machine. Two new models are available: (a) Machine 190-3, which has a cost of $190,000, a 3-year expected...
-
The following questions concern unqualified audi tor's reports. Choose the best response. a. An auditor's unqualified standard report (1) implies only that items disclosed in the financial statements...
-
Best Bathware Company manufactures faucets in a small manufacturing facility. The faucets are made from zinc. Manufacturing has 50 employees. Each employee presently provides 36 hours of labor per...
-
Romano??s Frozen Pizza Inc. has determined from its productionbudget the following estimated production volumes for 12'' and 16''frozen pizzas for September:Units12" Pizza16" PizzaBudg 2 answers
-
Cary Company manufactures two models of industrial componentsa Standard model and an Advanced Model. It has provided the following information with respect to these two products: Standard Advanced...
-
Calculate the value of least radius of gyration for Compound column consisting of IS HB 250 @ 536.6 Nu with one cover plate 300mm x 20mm on each Range.
-
The existence of audit risk is recognized by the statement in the auditor's standard report that the auditor a. Obtains reasonable assurance about whether the financial statements are free of...
-
. What are the input devices for a computer accounting system?
-
What effect do the ideal roles have upon the timing of the various responsibilities for the two phases of follow-up? Explain.
-
Which of the following is not a factor that might affect the likelihood that a control deficiency could result in a misstatement in an account balance? a. The susceptibility of the related assets or...
-
Why do internal auditors study additional documents on site at the auditees place of operations?
-
Below are data on truck production (number of vehicles completed) during the second shift at five truck plants for each day in a randomly chosen week. Research question: Are the mean production rates...
-
Perform the operation by first converting the numerator and denominator to scientific notation. Write the answer in scientific notation. 7,200,00/0.000009
-
Consider a linear demand curve, Q = 350 7P. a) Derive the inverse demand curve corresponding to this demand curve. b) What is the choke price? c) What is the price elasticity of demand at P = 50?
-
An economy consists of two consumers (Julie and Carina), each consuming positive amounts of two goods, food and clothing. Food and clothing are both produced with two inputs, capital and labor, using...
-
You have a utility function given by U = 2I + 10I. You are considering two job opportunities. The first pays a salary of $40,000 for sure. The other pays a base salary of $20,000, but offers the...
-
P Ltd bought 40,000 shares in \($1\) Ltd and 27,000 shares in \($2\) Ltd on 31 December 2002. The following balance sheets were drafted as at 31 December 2003. You are to draw up a consolidated...
-
Pops Ltd buys shares in Sub 1 and Sub 2 on 31 December 2007. You are to draft the consolidated balance sheet as at 31 December 2008 from the following: Pops Balance Sheet as at 31 December 2008 E...
-
Prepare a consolidated balance sheet from the following details as at 31 March 2006. During the year, Pa sold goods which had cost 1,900 to Daughter for 2,800. None of these goods had been sold by...
Study smarter with the SolutionInn App