--%>

Question on utility function

 Assume a consumer with the given utility function: U = 3y1y2 + 5.

  1. Suppose y2 = 1, derive the marginal utility schedule for y1. In what direction is it moving?
  2. Obtain indifference curves for U = 23 and for U = 59.
  3. Suppose money income = $18.00, p1 = $6.00, and p2 = $2.00, determine the consumer equilibrium position by using the above indifference curves.
  4. Suppose money income = $18.00, p1 = $2.00, and p2 = $2.00, determine the consumer equilibrium position by using the above indifference curves.
  5. Employing the results of (3) and (4):                                                                                                                                                             
    • How much was the rise in demand for good 1 caused by the substitution effect? How much was caused by the income effect?
    • Draw the consumer demand curve for good 1
    • Find out whether goods 1 and 2 are substitutes, complements, or independents.
    • Derive the price elasticity of demand and define whether it is elastic, inelastic, or unitary elastic.
    • Suppose that money income rise from $18.00 to $30.00 while prices remain constant at p1 = $6.00 and  p2 = $2.00. Determine the new consumer equilibrium position. By using the results just obtained, classify goods 1 and 2 according to whether they are superior, normal, or inferior goods.

   Related Questions in Microeconomics

  • Q : Problem on competitive equilibrium of

    The economy consists of two consumers, A and B. Both consumers are endowed with one unit of good 1 and one unit of good 2. Consumer A is entirely indifferent between all consumption plans. Consumer B has the utility function u(xB1 ; xB

  • Q : Illustration of Rational Ignorance I

    I have a problem in economics on Illustration of Rational Ignorance. Please help me in the following question. Supposing that the meat you purchase from a grocery store is good devoid of inspecting its quality yourself with the microscope is an illustration of: (1) Be

  • Q : Define Invisible items Invisible items

    Invisible items: All kinds of services that are rendered to or obtained from abroad are termed as invisible items. Such are invisible as these are not made up of any matter or material. The record of such items is not obtainable with the ports. Illust

  • Q : Reducing elasticities of demands by

    By product differentiation, firms try to increase the: (w) demands for their products, when reducing elasticities of demands. (x) supply elasticities of competing products. (y) price elasticity of the demand for their products. (z) marginal costs of t

  • Q : Predictable Flows of Income Vigorous

    Vigorous competition for predictable flows of income recommends that federal agricultural subsidies will tend to be rapidly: (1) spent because most farmers lack sufficient budgeting skills. (2) capitalized within higher prices for farm land. (3) slash

  • Q : Monopsonist-Wage discriminate Compared

    Compared with the price taker in labor market, the monopsonist which can’t wage discriminate will: (i) Hire more labor at any specified wage. (ii) Hire less labor at any wage. (iii) Pay a higher wage for any specified quantity of labor. (iv) Hire more prolific l

  • Q : Analytic Time-The Short Run I have a

    I have a problem in economics on Analytic Time-The Short Run. Please help me in the following question. Economists classify a time-period in which at least one resource is fixed as: (i) Short run. (ii) Long run. (iii) Production period. (iv) Profit period.

  • Q : Determine total revenue by zero

    Hybrid Roses is the merely florist in 60 miles of Presidio, Texas. Often, lots of Texans are romantics at heart. When Hybrid Roses set the price of a dozen roses at the point where marginal revenue is zero, in that case its total revenue

  • Q : Price Rigidity Price Rigidity: The

    Price Rigidity: The other significant feature of oligopoly is price rigidity. Price is rigid or sticky at the prevailing level due to the fear of reaction from the rival firms. When an oligo

  • Q : Higher labor force participation rate

    Poverty stricken families are seldom described by: (w) a female headed household. (x) higher labor force participation rates. (y) more frequent illnesses. (z) higher birth rates and more children. Hey friends pleas