Suppose that shellys preferences for consumption and, Ask an Expert

Economics

Suppose that Shelly's preferences for consumption and leisure can be expressed as u(c ,l)=(c-300) (l-60).

a) Calculate her utility, u0 , if she consumes c = $1000 and enjoys l = 110 hours of leisure per week.

b) Evaluate her marginal utilities of consumption and leisure at this point and use them to determine the slope of her indifference curve at this point. [Hint:Using calculus, it can be shown that for any given level of utility u, MUc = l - 60 and that MUl = c - 300.]

c) Marginal utilities are important because they can be used to calculate the change in utility, ?u, that results from changing c and l by the small amounts ?c and ?l. The induced change in utility is approximately (≈): ?u ≈ MUl ?l + MUc ?c. Based on your answers for (b), what happens to her utility if her consumption increases by ?c = $2 and her leisure declines by ?l = 1 hour?

d) Now compute her utility when c = $1,002 and she enjoys l = 109 hours of leisure. How close is your (approximate) calculation in part (c) to the exact calculation you just did?

View complete question

Business Economics, Economics

Category:- Business Economics
Reference No.:- M91706210

Have any Question?Write your Review or question?

Related Questions in Business Economics

The first part of the question is how do you determine if a

The first part of the question is how do you determine if a data set is normally distributed? The second part of the question is what is the Z score and how is that related to the distribution.

What are the main things to remember about elasticity

What are the main things to remember about elasticity, supply and demand, tax incidence, government controls on the market, and economic theories?

Ross textiles wishes to measure its cost of common stock

Ross Textiles wishes to measure its cost of common stock equity. The firm's stock is currently selling for $57.50. The firm expects to pay a $3.40 dividend at the end of 2013. The dividends for the past 5 years are shown ...

A student must answer 15 truefalse questions for a test but

A student must answer 15 true/false questions for a test, but the student did not study well. If the student randomly guesses on each question , what is the probability that the student answers 3 questions correctly?

Wendys fast-food restaurant sells hamburgers and chicken

Wendy's fast-food restaurant sells hamburgers and chicken sandwiches. On a typical weekday, the demand for hamburgers is normally distributed with a mean of 500 and standard deviation of 90 and the demand for chicken san ...

According to the polk company a survey of households using

According to the Polk Company, a survey of households using the Internet in buying or leasing cars reported that 81% were seeking information about prices. In addition, 44% were seeking information about products offered ...

Determine the minimum sample size required when you want to

Determine the minimum sample size required when you want to be 75% confident that the sample mean is within twenty units of the population mean. Assume a standard deviation of 327.8 in a normally distributed population

A small factory produces two types of toys trucks and

A small factory produces two types of toys: trucks and bicycles. In the manufacturing process two machines are used: the piece maker and the assembler. It takes 2 hours to make the pieces of the bicycles and 1 hour for t ...

In a certain survey of 1040 adults 88 reported having more

In a certain survey of 1,040 adults, 88% reported having more than one television at home. Find the actual number of respondents corresponding to the given percentage. The number of adults who reported having more than o ...

In a survey of 400 adults that say traffic is a problem

In a survey of 400 adults that say traffic is a problem: East reported 36% is a problem, South 33% problem, Midwest 26% problem and West 55% problem. (a) The 95% confidence interval for the proportion from the West say ...

4,153,160 Questions Asked
13,132 Experts
2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Recent Questions

Ask Business Economics Expert