Consumer consumes only two goods

Assignment Help Business Economics

Reference no: EM131162966

True/False - Briefly explain the reason.

a. The utility function U(X1,X2)=X1^a + 2X2^b. Corresponds to preferences for perfect substitutes.

b. All ordinary (non-Giffen) goods are also normal goods. (Hint: Use the Slutsky equation to support your answer)

c. If consumer consumes only two goods, both of them can be inferior.

d. If a consumer is making an optimal choice between two goods, x and y then, independently of his preferences, the MRS = (-PX)/(-PY) condition must always hold.

e. Any Giffen good is an inferior good. (Hint: Use the Slutsky equation to support your answer)

Reference no: EM131162966

Questions Cloud

Calculating relevant elasticities : Suppose demand function for good 1 is X1=(2m)/(P1+2P2). Calculating relevant elasticities answer the following questions. Show your calculation. Is this good ordinary or Giffen?

What is consumer optimal consumption bundle after policy : A consumer consumes only food (X1) and alcohol (X2) and he has a utility function U(X1,X2)=bX1+aInX2. Derive the Hicksian demand function for good 1 (h1). Show that it is downward sloping in its own price. What is the new budget constraint? What is t..

Pull promotional strategy and push promotional strategy : Explain the difference between a “pull” promotional strategy and a “push” promotional strategy. Under what conditions should each strategy be used? Give an example of a 'Pull Strategy' that you have experienced.

Instituting massive quantitative easing program : Since 2009, the Federal Reserve has been unable to stimulate the US economy sufficiently enough to generate 3-5% annual growth in GDP,despite keeping shorts-term interest rates near zero and instituting a massive "quantitative easing" program. Why ha..

Consumer consumes only two goods : The utility function U(X1,X2)=X1^a + 2X2^b. Corresponds to preferences for perfect substitutes. All ordinary (non-Giffen) goods are also normal goods. (Hint: Use the Slutsky equation to support your answer) If consumer consumes only two goods, both o..

How the federal reserve conducts monetary policy : Monetarists disapprove of how the Federal Reserve conducts monetary policy. What is it about the Fed's policy process that bothers them? Discuss their criticisms.

Explain how you define fairness in context the interaction : Can the practice of price discrimination be considered universally fair or universally unfair? Use the provided literature and video materials (or other resources) to defend your position. Explain how you define “fairness” in the context the interact..

The strategic planning and budgeting process of most firms : Capital budgeting is an integral part of the strategic planning and budgeting process of most firms. Explain and provide a numerical example of the use of the internal rate-of-return method and the Net Present Value (NPV) method of analyzing capital ..

If marginal product is greater than average product : If marginal product is greater than average product, average product is falling. Marginal cost is less than average variable cost when average variable cost is falling. If the average total cost curve is above the marginal cost curve, then total cost..

User Account

All Pages