Find the indirect utility function

Assignment Help Microeconomics
Reference no: EM13854449

1. Suppose U(x, y) = x + y

a. Find the condition for tangency of the budget constraint to an indifference curve.

b. Suppose Px = 6, Py = 6 and income is I. What maximizes the consumer's utility?

c. Suppose Px = 6, Py = 7 and income is I. What is the utility maximizing bundle?

d. What expenditure is required to achieve a utility of 10? How would your answer change if Px= 8?

e. Find the indirect utility function(s).

f. Find the expenditure function(s).

2. Faiyaz will live and earn income for two periods. He consumes two goods, y which is not addictive and c which is addictive. In the first period, his utility will be given by ciyi, but in the second period, first period consumption of the addictive good will raise the utility of consuming c in the second period, so that his utility in the second period is given by ycic2 + c2y2 where y >= 0. For simplicity, assume no discounting of future utility, an interest rate of zero, and that prices of the goods, Pc and Py, do not change between periods.

a. Set up one Lagrangian for utility maximization over the two periods and find the first order conditions for utility maximization.

b. What's the relationship between ci and c2?

c. What's the relationship between yi andy2?

d. Assuming an interior solution, does the size of the addiction parameter, y, affect the MRS at the utility maximizing bundle? If so, how?

e. Does the magnitude of the addiction parameter, y, affect the composition of the utility maximizing bundle? If so, how? (To check your expression, note that if y = 0, your demand equations should collapse to yi = y2 = I/4Py and ci = c2 = I/4Pc).

Reference no: EM13854449

Questions Cloud

Take normalized tables to create erd : Normalize data to 3rd normal form and consolidate forms and name remaining tables and Take normalized tables to create ERD
The term oligopoly refers to : The term oligopoly refers to
An example of us revaluation in psychology : An example of US revaluation in psychology in diagram form. Use the appropriate abbreviations to label each component.
An example of overshadowing in psychology in diagram form : An example of overshadowing in psychology in diagram form. Use the appropriate abbreviations to label each component.
Find the indirect utility function : Find the indirect utility function
A researcher and sports enthusiast is interested : 1. A researcher and sports enthusiast is interested in knowing if the salaries of professional baseball players are significantly higher or lower than the salaries of professional basketball players. She samples 100 professional baseball players and ..
Why are we concerned about the distribution of data : For the variable ARREST, what are the modes? Is the data normally distributed? Why are we concerned about the distribution of data
Analyze the primary documents on the racial philosophies : Write an essay using the conventions of historical writing described below that answers the following questions: What were the major tenets of each philosophy. Were their differences as substantial as the friction between Bookerites and Niagarites..

Reviews

Write a Review

Microeconomics Questions & Answers

  The free rider problem

Question: Explain why the free rider problem makes it difficult for perfectly competitive markets to provide the Pareto efficient level of a public good.

  Failure of the super committee is good thing for economy

Some commentators have argued that the failure of the “Super committee” is good thing for the economy?  Do you agree?

  Case study analysis about optimum resource allocation

Case study analysis about optimum resource allocation: -  Why might you suspect (even without evidence) that the economy might not be able to produce all the schools and clinics the Ministers want? What constraints are there on an economy's productio..

  Fixed cost and vairiable cost

Questions:  :   Which of the following are likely to be fixed costs and which variable costs for a chocolate factory over the course of a month?  Explain your choice.

  Problem - total cost, average cost, marginal cost

Problem - Total Cost, Average Cost, Marginal Cost: -  Complete the following table of costs for a firm.  (Note: enter the figures in the  MC   column  between  outputs of  0 and 1, 1 and 2, 2 and 3, etc.)

  Oligopoly and demand curve problem

Problem based on Oligopoly and demand curve,  Draw and explain the demand curve facing each firm, and given this demand curve, does this mean that firms in the jeans industry do or do not compete against one another?

  Impact of external costs on resource allocation

Explain the impact of external costs and external benefits on resource allocation;  Why are public goods not produced in sufficient quantities by private markets?  Which of the following are examples of public goods (or services)? Delete the incorrec..

  Shifts in demand and movements along the demand curve

Describe the differences between shifts in demand and movements along the demand curve. What are the main factors which can shift the demand curve? Explain why they cause the demand curve to shift. Use examples and draw graphs to support your discuss..

  Article review question

Article Review Question: Read the following excerpts from the article "Fruit, veg costs surge' by Todd, Dagwell, published in the Herald on January 25th 2011 and answer questions below:

  Long-term growth, international trade & globalization

Long-term Growth, International Trade & Globalization:- This question deals with concepts such as long-term growth, international trade and globalization. Questions related to trade deficit, trade surplus, gains from trade, an international trade sce..

  European monetary union (emu) in crisis

"Does the economic bailout of Spain and Greece spell the beginning of the end for the European Monetary Union (EMU)?"

  Development game “settlers of catan”

Read the rules of the game, the overview and the almanac for the Development Game "Settlers of Catan"

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd