Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Microeconomics Expert

Problem Set1

1. Consider the consumption decisions of R.B. Turbo, a new student at T University. Ms. Turbo has only on hand $1,000 in monthly income to spend on the food and housing. In terms of food, Ms. Turbo, a vegetarian, has found there is a nice restaurant called Veggies that offers vegetarian meals. She wants to purchase food from this restaurant and is considering their monthly dinner plan, which costs $125.00 per meal served every day in month (she can consume more than one meal a day). In addition, Ms. Turbo is looking for housing. She has found a cheap apartment building in a polluted area of New Jersey where the monthly rental of a one-bedroom apartment is $250.00, a 2-bedroom is $500, 00, a 3-bedroom is $750.00, and a 4-bedroom is $1,000 and so on. Suppose That Turbo has preferences that can be described by the following utility function:

U = X10.5X20.5

Where X1 is the quantity consumed of food per month (number of meals served every day in a month), and X2 is the number of bedrooms in her apartment.

A. Compute the number of bedrooms that Ms. Turbo’s apartment will have (gives a numerical answer and describes how it is obtained, including any derivations).

B. find out the number of meals that Ms. Turbo will consume every day at Veggies (again, provide a numerical answer and specify how it is obtained).

C. Assume that Ms. Turbo suddenly receives a $500 increase in monthly income. Would there be any changes in her consumption of housing and food? (Assume that she has the ability to upgrade to better apartments (with more bedrooms) and to change her monthly meal plan if she wants, so as to increase or decrease the number of meals she eats a day).

D. What is Ms. Turbo’s income elasticity of demand for housing?

E. Assume that Ms. Turbo has an income of $1,000 (as in parts A and B) but that, all of a sudden, Veggies decides to raise the price of its monthly program of meals from $125 per meal to $150. How many dishes will Ms. Turbo consume each day under the new program? Will she keep the same type of apartment (the same number of bedrooms)?

F. What is Turbo’s price elasticity of demand?

2. Assume that Mr. Chauncey Gardener consumes two goods, X1 and X2 .His preferences can be described by the following utility function:

U = X10.5X20.5

He faces the following prices in the market: P1 = $5.00 and P2 = $10.00. His income is $1,000. Assume that he spends all his income.

A. How much will he purchase of commodities 1 and 2? describe your answer.

B. Assume that the price of commodity 2 raises by $2.50 (from $10.00 to $12.50); what will be the change in the quantities consumed of goods 1 and 2? describe.

C. In the previous problem (part B), take the change in the quantity consumed of commodity 2 and decompose it into an amount coupled with the substitution effect and another one connected to the income effect (use the Slutsky decomposition discussed in class).
In answering these problems, remember to give numerical answers and to describe where your answers come from.

3. Consider the following utility function:

U = X1X2

Where X1 and X2 are quantities consumed of two goods. You are considering the actions of a consumer that maximizes utility. He or she has a fixed     income m, and     faces prices P1 and P2. The consumer spends all of its income on the two commodities.

A. Supposing that the consumer maximizes utility, what would be the accurate condition showing the ratio of each good purchased by the consumer?

B. Please derive the demand functions for X1 and X2, providing an algebraic expression for each and a diagrammatic representation.

C. What is the price elasticity of demand for commodity 1? What is the price elasticity of demand for commodity 2?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91318

Have any Question? 


Related Questions in Microeconomics

Description of assignmentreport paper basisstudents work

Description of Assignment: Report Paper basis. Students work together to research and profile a particular in Microeconomic policy: the property tax in the United States. Grading Criteria (What constitutes a good assignm ...

Assignmentthe paper is to be a properly formatted apa paper

Assignment The paper is to be a properly formatted (APA) paper that I expect will take at least 5 pages to do properly. It is to take the material discussed in the course and apply it to some issue or observation in your ...

Essay questionyour manager knows that you have completed a

Essay Question Your manager knows that you have completed a course in Purchasing and Materials Management. Your manager would like you to write an essay for your fellow workers about the key purchasing/ supply management ...

Assignmentone responsibility of an information assurance

Assignment One responsibility of an information assurance professional is to work with the organization's security team to explain risk assessment and report findings to executives. The report is likely to involve sensit ...

Assignmentwhat are the two distinguishing properties of a

Assignment What are the two distinguishing properties of a public good? Explain each in one or two sentences. Give an example of a public good different from any of the examples in your text or my notes. What is the "fre ...

Economics problemsconsumer demand analysis and estimation

Economics Problems Consumer Demand Analysis and Estimation Applied Problems Please complete the following two applied problems: Problem 1: Patricia is researching venues for a restaurant business. She is evaluating three ...

Assignmentthe paper is on googles business ethics in the

Assignment The paper is on Google's Business Ethics in the area of Sustainability. How does Google contribute or detract from various aspects of sustainability? Sustainable businesses make products and services which fil ...

Assignmentchoose one of the readings from chapters 14 15 or

Assignment Choose one of the readings from chapters 14, 15, or 16 and summarize, explain, and evaluate the main points of the reading in a minimum of 3 paragraphs. Do not simply cut and paste from the reading, but summar ...

Assignmentin this assignment you will discuss the role of

Assignment In this assignment, you will discuss the role of entrepreneurship in improving the economic condition of countries and individuals and understand the manner in which this perception has spread around the world ...

Assignmentselect and review an inspection report posted on

Assignment Select and review an inspection report posted on the OSHA website. The inspection reports can be searched by industry group or establishment name by accessing the reports through the OSHA's Statistics & Data P ...

  • 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

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen