Estimate marginal rate of substitution of peaches for donuts

Assignment Help Business Economics

Reference no: EM13887844

a) A consumer has a utility function, donuts (A) and peaches (B) given by u(A,B) = square root AB

b) What is the maximum amount peaches she would be willing to give up for one additional unit of donuts, estimate the marginal rate of substitution of peaches for donuts?

Reference no: EM13887844

Questions Cloud

Divided between interest and principal repayment over time : Suppose you bought a house and took out a mortgage for $50,000. The interest rate is 8%, and you must amortize the loan over 10 years with equal end-of-year payments. Create a graph that shows how the payments are divided between interest and princip..

Is it possible to tell in which month you buy more eggs : In April, eggs cost $2 per dozen, wine costs $1 per bottle, your income is $120, and you buy 50 dozen eggs. In May, eggs cost 50 cents per dozen, wine still costs $1 per bottle, and your income is $60. Is it possible to tell in which month you are ha..

The payoff of the bonds is stochastic : Consider an intertemporal model in which representative households choose consumption, c (subscript t), money holdings, m(subscript t+1), and bond holdings, b (subscript t+1), to maximize their utility over time, prices are perfectly flexible, and al..

Representative households choose consumption : Consider an intertemporal model in which representative households choose consumption, c(subscript t+1) and two types of bonds b(subscript 1,t+1) and b(subscript 2,t+1) to maximize their utility over time, prices are perfectly flexible, and all marke..

Estimate marginal rate of substitution of peaches for donuts : a) A consumer has a utility function, donuts (A) and peaches (B) given by u(A,B) = square root AB. What is the maximum amount peaches she would be willing to give up for one additional unit of donuts, estimate the marginal rate of substitution of pea..

Find the optimal width of the road : Suppose that the government is deciding how wide to make a public road that services one resident named Bob. Bob’s willingness to pay for each metre of road is described by 20 – 2Q. Graph Bob’s willingness to pay (demand) curve. Suppose that the marg..

What is the estimated elasticity of demand for mrt rides : The Mass Rapid Transit (MRT) System in Hong Kong has been running significant losses. Transport Ministry officials have argued over whether to raise fares to combat the losses. What is the estimated elasticity of demand for MRT rides?

Uncertain effect on the level of average cost : Indicate whether each of the following involves an upward or downward shift in the long run average cost curve or, instead, involves a leftward or rightward movement along a given curve. Also indicate whether each will have an increasing, decreasing,..

Based on the available balance at the end of year : Charlie has $12,000 to invest for a period of 5 years. The following three alternatives are available to him: Account 1 pays 3.00% for year 1, 6.00% for year 2, 9.00% for year 3, 12.00% for year 4, and 15.00% for year 5, all with annual compounding. ..

User Account

All Pages