Question: Elif has a utility function u(x, y) = 4x/2 + 2y/2, answer the following questions. (a) Consider that the price of x is 60

Elif has a utility function u(x, y) = 4x/2 + 2y/2, answer

Elif has a utility function u(x, y) = 4x/2 + 2y/2, answer the following questions. (a) Consider that the price of x is 60 TL. the price of y is 30 TL and monthly income is "M" TL. Elif uses all of her income each month to purchase x and y. Solve the constraint optimization problem and find the expressions for x and y*. (b) Confirm the second order condition for the maximization for part (a) using bordered Hessian Matrix. (c) Find the value function, given x* and y*. (d) Suppose that her income has increased by one unit. How does the optimized value of u(x, y) change? Answer by using Envelope Theorem. Interpret the found value.

Step by Step Solution

★★★★★

3.46 Rating (156 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

a To solve the problem of maximizing utility we aim to maximize the function ux y 4x12 2y12 given the constraint that the monthly income M is allocate... View full answer

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!

Answer the following questions based on the information presented for Cloud 9 in Appendix B of this book and in the current and earlier chapters. You should also consider your answers to the case...

The sandwich company, Alamo Lone Star (ALS) prepares sandwiches for sale in vending machines in a large number of locations in an urban area. The four types of sandwich that are now provided are...

(CV, EV and CS) Consider a person who has a utility function U (x1; x2) = min (2x1; x2). This is a person for whom goods 1 and 2 are perfect complements. This utility function is not differentiable,...

G i v ecorrec t an s w ers , t hank s . NATIONAL FEDERATION OF INDEPENDENT BUSINESS et al. v. SEBELIUS, SECRETARY OF HEALTH AND HUMAN SERVICES, et al. certiorari to the united states court of appeals...

no incomplete answers\ a. Using the aggregate production function, show that the output/income per capita at time t is a function of the private physical capital per capita at time t and the public...

acc On January 1st. 2017, X Company bought 80% of the outstanding common shares of the Y Company for $140,000 cash. On that date Y Company had $50,000 of common shares outstanding and $60,000...

Please read chapter 4 the answer the question 10: It may seem puzzling that a negative externality may induce a strategic complementarity. But ments over the Nash equilibrium. It is not surprising...

Question one. Chepa's utility function is given by U (x, y) = ln x + 4 ln y. Assume that Chepa has endowments (10, 10) and that Py = 10 throughout the problem. I need help with questions G) and H)...

Managerial Accounting - 6th Edition by James Jiambalvo Chapter 14 - Problems 13, 14, and 15 (see attachment) Problem 14-13. Common-Size Financial Statements (p.564) Problem 14-14. Horizontal Analysis...

The details of weekly output and input for a fabrication process are as follows: output is 600 units, with a standard selling price of $95 per unit. For the week, total labor costs are: 10 workers at...

What is the function of rebate in a typical construction joint?

An article posted by the Canadian Visa Organization regarding the cost of living in Canada in 2021 stated that Canadians spend most of their salary on paying house rent or housing mortgages....

A solar cooker consists of a curved reflecting surface that concentrates sunlight onto the object to be warmed (Fig. P20.63), the solar power per unit area reaching the Earths surface at the location...

Woodhaven Service is a small, independent gas station located in the Woodhaven section of Queens. The station has three gasoline pumps and two service bays. The repair facility specializes in...

Smokin! A pitcher throws a 0.142-kg baseball at 47.2 m/s (Fig. P21.62). As it travels 19.4 m, the ball slows to a speed of 42.5 m/s because of air resistance. Find the change in temperature of the...

A small metal crucible is taken from a 200C oven and immersed in a tub full of water at room temperature (this process is often referred to as quenching). What is the approximate final equilibrium...

Kerianne paints landscapes, and in late 2018 placed four paintings with a retail price of $250 each in the Holmstrom Gallery. Kerianne's arrangement with Holmstrom is that Holmstrom will earn a 20%...

The assumption that evaluation of a project may be based on the project's incremental cash flows \ is / are called _ _ _ _ _ _ _ _

If the demand function for Noah and Naomi's garden benches is what is their inverse demand function? QDIPI 1,000

John is a salesman for the local car dealership. He can divide his 40-hour work week between talking to customers that walk in the door and calling possible prospects. Let W be the number of hours...

For some rock concerts, thousands of fans stand in line for hours to purchase tickets. What is the likely event on aggregate surplus that if resale of those tickets in a competitive market is...

Calculate the missing values for the promissory notes described

Calculate the maturity value of a 120-day, $1000 face value note dated November 30, 2011, and earning interest at 10.75%.

A 90-day non-interest-bearing note for $3300 is dated August 1. What would be a fair selling price of the note on September 1 if money can earn 7.75%?