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 : Demand curve for peanuts Question: a)

    Question: a) Johnny consumes peanuts (x1) and a composite good (x2). His utility function is U = x1x2. His marginal utilities are MU1 = x<

  • Q : Well-recognized market structure

    Well-recognized market structures do not comprise: (i) monopoly. (ii) monopolistic competition. (iii) oligopoly. (iv) oligarchy. (v) pure or perfect competition. I need a good answer on the topic of Economi

  • Q : Profit-maximizing lumber on the average

    On the average, that profit-maximizing lumber mill as in demonstrated graph is: (w) making an economic profit of regarding $0.20 (20¢) per 2×4. (x) incurring variable costs of $0.90 (90¢) per 2×4. (y) suffering an accounting loss

  • Q : Occurrence of economic profits in a

    Entry within a competitive industry will continue till: (w) accounting losses are driven to zero. (x) economic profits equal accounting losses. (y) bookkeeping profit approaches zero. (z) economic profits are driven to zero. Can an

  • Q : Changing in marginal cost without price

    When this firm's marginal cost curve moved upward from MC2 to MC3, the firm would: (w) reduce output from Q3 to Q2 and increase price from P3 to P4. (x) reduce output by Q2 t

  • Q : Incentives given by higher interest rate

    Higher interest rates give incentives for: (w) a corporation to build a new plant. (x) a family to save more. (y) a family to buy a new house. (z) automakers to produce more new cars. Please choose the right answer

  • Q : Technological advancement influencing

    Describe how technological advancement influence the supply of specific product.

  • Q : Maximum possible total revenue by sales

    Maximum possible total revenue by sales of the especially popular St. Valentine’s Day software is about: (i) $140 million. (ii) $250 million. (iii) $350 million. (iv) $420 million. (v) $1 billion.

    Q : New cost-saving technologies adopting

    Firms are under greater pressure to rapidly adopt any new cost-saving technologies when an industry is: (i) closely regulated by government. (ii) controlled by professional managers instead of owners. (iii) dominated by a vast monopoly. (iv) highly co

  • Q : Mixed economic resolves essential

    Why do some people think that a mixed economic system resolves essential economic problems?

©TutorsGlobe All rights reserved 2022-2023.