A mixed farm family produces 100 kg of fertile soils of beans and 50 kg of...

 

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A mixed farm family produces 100 kg of fertile soils of beans and 50 kg of carrots weekly. The utility equation of this family can be represented by U = B¹/2 C¹2, where B and C represent the amount of consuming beans and carrots per week of this family respectively. The price of peas and carrots is 10 baht per kg. 2.1 If the price of beans falls to 5 baht per kg while the price of other products remains unchanged. Find the magnitude of the change in demand for beans caused by the substitution effect, ordinary income effect, and endowment income effect. (9 points) 2.2 Draw a diagram with the demand of beans on the horizontal axis to show the magnitude and direction of the substitution effect, ordinary income effect, and endowment income effect. (3 points) 2.3 One of the family's relatives planned to settle and find work in the city. He has the utility equation of current and future consumption can be expressed with U(C₁,C₂) = min{C₁,C₂} ,where C, and C₂ represent current and future consumption respectively. At the level of interest rates and headline inflation. Now, he earns 4,000 baht per month and expects that when he moves, he will earn 8,000 baht per month. If there is an incident that causes the government to cut interest rates, Will he have better or worse welfare? Explain. (3 points) A mixed farm family produces 100 kg of fertile soils of beans and 50 kg of carrots weekly. The utility equation of this family can be represented by U = B¹/2 C¹2, where B and C represent the amount of consuming beans and carrots per week of this family respectively. The price of peas and carrots is 10 baht per kg. 2.1 If the price of beans falls to 5 baht per kg while the price of other products remains unchanged. Find the magnitude of the change in demand for beans caused by the substitution effect, ordinary income effect, and endowment income effect. (9 points) 2.2 Draw a diagram with the demand of beans on the horizontal axis to show the magnitude and direction of the substitution effect, ordinary income effect, and endowment income effect. (3 points) 2.3 One of the family's relatives planned to settle and find work in the city. He has the utility equation of current and future consumption can be expressed with U(C₁,C₂) = min{C₁,C₂} ,where C, and C₂ represent current and future consumption respectively. At the level of interest rates and headline inflation. Now, he earns 4,000 baht per month and expects that when he moves, he will earn 8,000 baht per month. If there is an incident that causes the government to cut interest rates, Will he have better or worse welfare? Explain. (3 points)

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21 To determine the magnitude of the change in demand for beans caused by the different effects we need to consider the price change and its impact on ... View the full answer