(a)_Suppose we have preferences U(X, Y) = X Y.. What is the utility at the bundle...

 

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(a)_Suppose we have preferences U(X, Y) = X² Y².. What is the utility at the bundle X = 5 and Y = 20? Create a table then graph/sketch the indifference curve through (5, 20). Interpret the MRS (with MRS = Y/X) at this bundle. < (b)_Let prices be Px = $5, Py = $5 and income M = $1000. Draw/sketch the budget constraint. Explain what the slope of the budget line means in economic terms. < (c) State the consumer's utility maximization problem and express this in words. What are the two conditions (equations) that identify the optimum? Sketch this in a figure and explain. < (d) Use the information in (a) and (c) to show that demands are: X = ½ M/Px and Y = 1/2 M/PY. < (e) For the income and prices in (b), what is optimal X, Y, and utility? Show your work. < (f) Suppose Px falls to $4 and Py rises to $7 but income stays at $1000. Does consumer utility rise or fall? Show and explain. (g) Calculate the Compensating Variation that ensures the consumer is no worse off nor better off with these price changes. Show and explain your work. (a)_Suppose we have preferences U(X, Y) = X² Y².. What is the utility at the bundle X = 5 and Y = 20? Create a table then graph/sketch the indifference curve through (5, 20). Interpret the MRS (with MRS = Y/X) at this bundle. < (b)_Let prices be Px = $5, Py = $5 and income M = $1000. Draw/sketch the budget constraint. Explain what the slope of the budget line means in economic terms. < (c) State the consumer's utility maximization problem and express this in words. What are the two conditions (equations) that identify the optimum? Sketch this in a figure and explain. < (d) Use the information in (a) and (c) to show that demands are: X = ½ M/Px and Y = 1/2 M/PY. < (e) For the income and prices in (b), what is optimal X, Y, and utility? Show your work. < (f) Suppose Px falls to $4 and Py rises to $7 but income stays at $1000. Does consumer utility rise or fall? Show and explain. (g) Calculate the Compensating Variation that ensures the consumer is no worse off nor better off with these price changes. Show and explain your work.

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a Assumed The pair X Y 5 20 Utility calculation at the specified bundle Utility level at specified bundle hence equals 10000 utils The Indifference Cu... View the full answer