Question: 2. Suppose Bernadette has a utility function resulting in an MRS = Y / X (from U = vXY) and she has an income of

2. Suppose Bernadette has a utility function resulting in an MRS = Y / X (from U = vXY) and she has an income of $80 (i.e. M = 80). Suppose she faces the following prices, Px = 6 and Py = 5. If the price of good Y goes up to Py = 6, while everything else remains the same, find Bernadette's equivalent variation (EV). Solution: At the initial equilibrium, we have the following consumer equilibrium conditions: Y = 6 X UT 6X + 5Y = 80 Solving for our consumer's initial equilibrium X = 6.667 Y= 8 U = VXY = V53.333 = 7.303 (denoted as U1)

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!

1. Suppose Bernadette has a utility function resulting in an MRS = Y / X (from U = XY) and she has an income of $80 (i.e. M = 80). Suppose she faces the following prices, PX = 6 and PY = 5. If the...

Exercise one. 1.On the market for widgets, the maximum price anyone is willing to pay is $100 (quantity demanded is zero at a higher price). The equilibrium price is $80 and the equilibrium quantity...

Part 2: long problems (70 marks) Problem 1 (30 marks) Suppose a consumer buys two goods, good X and a composite good Y. The utility function is given as U(X, Y) = 5 VXY . 1=$20 Px = $2 Where I is...

Problem 2: Time and monetary constraints with options There are two goods, X and Y, available in arbitrary non-negative quantities (so the consumption set is R+2 ). Beenish has preferences over...

5. Wanda Littlemore's utility function is U(x, y) =x + 46y 23:2. Her income is $135. If the price of x is $1 and the price of y is $18, how many units of goodx will Wanda demand? a. 9 b. 12 c. 16 d....

man2 Exercise #1. Annas preferences over consumption bundles (x1,x2) are summarized by the utility function U (x1,x2) = x1 (x2 + 1)2. (a) Derive an algebraic expression for the marginal utility MU1...

Part 1: multiple choice (30 marks) 5 marks each 1) Which of the following utility functions has a diminishing MRSxy ? Part 2: long problems (70 marks) a) U = 5X + 7Y Problem 1 (30 marks) b) U = 2X +...

2 a) Given utility function U (C; R) = min (C; 2R); daily endowment of time 24h, price and wage pc= w = 1; nd optimal choice of C; relaxation time R and labor supply L. (three numbers, use secrets of...

help get the answers.. its a complete question 1. (10 points) Annie and David are painting their apartment. At the paint store, David says he prefers Canary Yellow to Bumblebee Yellow, Lime Yellow,...

DeBauge Realtors Incorporated is a realty firm owned by Jeff and Kristi DeBauge. The DeBauge family owns 100% of the corporation’s stock. The following summarized data (in thousands) are taken...

The projection is defined by the equations x and y 12 ln ((1 sin ) (1 sin )), where is the longitude of the point in the center of the map Compose a program that accepts and the latitude and...

According to the same Glassdoor blog report mentioned in the previous question, the mean monthly pay for interns at Facebook is $6,213. Suppose that the intern monthly pay is normally distributed,...

Identify and explain what might facilitate and constrain knowledge development processes.

7. How can the models we use have a detrimental effect on others?

2. In this chapter, the reader should reflect on the following concepts: Systemic structuring, the displaced error, the communicable part of knowl-edge, tacit knowledge, hidden knowledge, analogy,...

2. List five points that are crucial to pay attention to if you want to positively influence someone from a foreign culture.