Question: 1. A consumer has the utility function U (x 1 , x 2 ) = min (2x 1 , x 2 ) and an income

1. A consumer has the utility function U (x₁ , x₂) = min (2x₁ , x₂)and an income of $200. Initially, the price of good 1 is $6 and the price of good 2 is $2.

a) Find consumer's demand function for good 1.

b) Then, price of good 1 decreases to $ 4 and price of good 2 stays at $2. What is the total change in demand for good 1? Show the income and substitution effects of this price change both graphically and algebraically.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!

micro 1. A consumer has the utility function U ( X , Y ) = MIN(3X, 6Y) and $109 to spend. The price of X = $5, and the price of Y = $1. Calculate the equivalent variation when the price of X changes...

1. A consumer has the utility function U ( x 1 , x 2 )= min {2x 1 ,x 2 } and an income of $200. Initially, the price of good 1 is $6 and the price of good 2 is $2. a) Find consumer's demand function...

n December 31, 2018, ABC Partnership's Statement of Financial Positions shows that A, B and C have capital balances of P500,000, P300,000 and P200,000 with profit or loss ratio of 1:3:6. On January...

Hi tutor. Kindly help me solve these I1 Exercise 2. Let f: R" + R be a real-valued function on R", and Xo = E R a In point. (a) If f is differentiable at Xo, explain what it means to say that the...

A consumer with the utility function U (x;, x,) = xx, faces prices p, = $4,p, = $5 and has an income of $100. Suppose the price of the first good rises to $8. Compute the Slutsky substitution and...

9- (lpts) Consider a consumer with the utility function U (X ,Y) = Kile and suppose that the prices of goods and income level are given by p; = $2, pr = $3 and the income of consumer is I = $83!]....

An individual has preferences over two goods (x and y) that are represented by the utility function U = min { x , y } The individual has income $60, the price of x is $4 and the price of good y is...

Max is a utility-maximizer consumer with a utility function U ( x , y )= x + y and the usual budget constraint M = px x + p y y , where M is his income, px and py is the price of good x and y,...

An individual has preferences over two goods (x and y) that are represented by the utility function U = min { x , y } The individual has income $60, the price of x is $4 and the price of good y is...

Nates Pool Services uses from one to three chemicals to clean swimming pools. Variance data for the month follow (F indicates favorable variance; U indicates unfavorable variance): The budget allowed...

Describe why externalities generate market failure.

Which of the following is not a true statement regarding a sale and leaseback? Option A It occurs when the owner of an asset sells the asset and enters into a lease agreement to lease the asset back....

A company's balance sheet shows: cash $22,000, accounts receivable $16,000, office equipment $50,000, and accounts payable $17,000. What is the amount of stockholders' equity?

Henry Ltd has two divisions the Widget Division and the Gadget Division. The Widget Division manufactures widgets, which are then transferred to the Gadget Division for further processing into...

You have been contacted by Allied Corporation to assist them with the closeout of their year-end. Their family accountant of 35 years decided that he wanted to start retirement a little early this...

Write a program to wish happy birthday to a student. Firstly, take today month and day as an input and secondly take birthday as an input in the form of month and day. If the input day and month...

11. What types of information collected are most frequently used in decision-making?

10. How much time does it take between when we collect information until it is used in decision-making?

2. Ask questions, listen rather than attempt to persuade.