Question: As in the previous question, a consumer has a utility function given by U(x,y)=2x+4y, the price of x is 5, the price of y is

As in the previous question, a consumer has a utility function given by U(x,y)=2x+4y, the price of x is 5, the price of y is 2, and income is 10.Suppose that the price of y increases to 12. The income effect on the consumption of x of the price change of y:

a. is positive, meaning that the income effect will go in the same direction of the substitution effect

b. is negative, meaning that the income effect will go in the opposite direction of the substitution effect

c. is zero, since the goods are perfect substitutes there is no income effect

d. cannot be determined with the information provided

As in the previous question, a consumer has a utility function given by(,)=2+4

U(x,y)=2x+4y, the price of x is 5, the price of y is 2, and income is 10.Suppose that the price of y increases to 12. What is the magnitude (or absolute value) of the income effect on the consumption of x of the price change of y?

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. (14 total points) Suppose a consumer has a utility function given by U (X, Y) = MIN (X, 3Y). The consumer has $60 to spend (M = $60). The Price of Good Y is Py = $1. a) (10 points) Draw the...

1. (14 total points) Suppose a consumer has a utility function given by U (X, Y) - MIN (X, 3Y). The consumer has $60 to spend (M = $60). The Price of Good Y is Py = $1. a) (10 points) Draw the...

Note : For this question you are required to draw well-labeled graphs. Please make sure that the graph is large in size so that all the details can be easily noted. Suppose a typical consumer is...

Let X be a random variable determining an individual s income next year, given her likeliness of being sick. Let P r ( x ) be the probability mass function ( pmf ) of this variable. An individual is...

1. (35 points) A consumer has a utility function given by U ($1, 22;) = 4'/x1 + $2, where $1 and .122 are the two goods he consumes. His income is m and the prices for the goods are p1 and pg per...

A consumer has a utility function given by (x, y ) = 34- + by. The price of x 18 2 and the price of y is 4. If the consumer has an income of 68, how much x and y will they choose to consume to...

The price of Good X (Px) is $1. The price of Good y (Py) is $1.25. The consumer has a utility function given by: U= X^0.5 Y^0.5 Solve the optimization condition for Y and enter the miss parameter Y=...

Suppose an individual had a utility function given by: U = XSY 1 . Calculate this individual's Marginal Rate of Substitution (MRSxy) when they have a bundle with 3 units of Good X and 1.5 units of...

can you please check if i did my work correctly? thank you so much! Question 5 4 pts Your utility function over the goods X and Z takes the following form: U (X, Z) = X0.5+ 20.5 You want to maximize...

Reference: For questions 19 to 25, refer to the information given below about Mr. Thomas O'Malley's preferences: Mr. Thomas O'Malley has a utility function given by U = 6X +2Y where X and Y are two...

Suppose that X ~ N(, 2) and that P(X 5) = 0.8 and P(X 0) = 0.6 What are the values of and 2?

Haarlem Bhd. (Haarlem) is a public listed company. As at 1 February 2018, Haarlem has the following shares in issued: 950.8 million ordinary shares, 138.7 million 5.4% preference shares, and - 146.5...

ABC Co . has a D / E ratio of . 5 , a P / E of 1 0 , and $ 5 0 , 0 0 0 in outstanding debt. The debt is selling at par and the shares of stock are selling at $ 2 5 a share. How many shares of stock...

What are the best practices one should use across social media platforms to ensure that your content gets more engagement?

=+3. Is there a maximum absolute amount that a CEO should earn? Is $1 million a year OK? What about $10 million? $100 million? Is it OK to pay a CEO any amount, as long as the net benefit the CEO...

=+5. Primark is a low-cost retailer, while Marks & Spencer seeks to differentiate its products based on quality. Is there a causal link between these two different business-level strategies and the...

=+you get the sense that this is a genuine effort, or is it window dressing?