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Samantha purchases food (F ) and other goods (Y ) with the utility function U = FY. How many units of food does she consume when she maximizes utility?
Using revealed preference analysis (without drawing indifference curves), what can you say about how Sally's ranks her initial and later baskets?
How much would she have needed to give him in cash to make him just as well off as with the gift certificate?
Will Joe be better off or worse off after the price increase and cash transfer than he was before? What will happen to his gasoline consumption?
If the new proposal is adopted, how will the student's consumption pattern (in particular, the amount of root beer consumed) and welfare be affected?
When he maximizes utility subject to his budget constraint, he purchases 5 units of y. What must be the price of y and the amount of x consumed?
On the graph you drew in part (a), draw a set of indifference curves that illustrates why Toni may be better off with the frequent flyer program.
After the prices change, can you predict whether Julie's utility will be higher, lower, or the same as under the initial prices?
Draw several of Dr. Strangetaste's indifference curves, including one that is tangent to his budget line.
Helen's preferences over CDs (C) and sandwiches (S) are given by U(S, C) = SC + 10(S + C), with MUC =S + 10. Find Helen's optimal consumption basket.
Dave currently consumes 10 hot dogs and 6 sodas each week. If not, how should he reallocate his spending in order to increase his utility?
Currently, he also consumes 15 hamburgers per week, and his marginal utility of a hamburger is 8. Is Ray maximizing utility at his current consumption basket?
If so, show why. If not, should she buy fewer hamburgers and more milkshakes, or the reverse?
The prices of the two goods are Px = $5 and Py = $10, and the consumer's income is $220. Determine the optimum consumption basket.
Ann is currently spending all of her income. She is buying 8 units of food. How many units of clothing is she consuming?
What is the marginal rate of substitution of food for clothing at her optimal basket? Show this graphically and algebraically.
What is the expression for Sarah's budget constraint? Show graphically how Sarah's budget line changes if the price of oranges decreases to $0.25.
What is the expression for Pedro's budget constraint? What is the maximum number of square feet of housing he can purchase given his monthly stipend?
How can revealed preference analysis help us learn about a consumer's preferences without knowing the consumer's utility function?
Explain why a good with a positive price elasticity of demand must violate the law of demand.
Sketch a graph of a perfectly inelastic demand curve. What will happen to the equilibrium quantity of Maris baseball cards bought and sold?
Derive the inverse demand curve corresponding to this demand curve. What is the price elasticity of demand at P = 50?
In 2011, Ps =10, Y = 40, and PA = 100. How much steel will be demanded in 2011? What is the price elasticity of demand, given market conditions in 2011?
If R = 2 and T = 10, calculate the equilibrium price and quantity of golf balls. Calculate the price elasticity of demand and the price elasticity of supply.
How would you expect an increase in the price of gasoline to shift the demand for transportation by taxi cabs?