Jack has a utility function ux1 x2 x1 x2 power of 2the

Reference no: EM13378647

Jack has a utility function U(x1, x2) = x1 * x2 power of 2

The price of x1 is 3$ and the price of x2 is $1 and Jack has an income of $90.

A) Define marginal rate of substitution (MRS). Derive the expression for his marginal rate of substitution.

B) How much of each goods will he demand?

Let's now consider the case where government collects an income tax (is just tax on income, and does not depend consumed quantity). Government imposes 10% incometax. (In other words, Jacks income decreases in the amount of income tax).

C) How much of each good will he demand in this case? (The price of x1 is 3$ but his income has decreased)

D) Calculate utilities obtained by bundles without tax and with income tax. Draw Jack's best bundles in a graph. (Budget curves, best bundles and maximum utilities for both situations in one graph). Label X-axis for good 1 and Y-axis for good 2.

Reference no: EM13378647

Questions Cloud

Gwinnett paper company manufactures three products computer : gwinnett paper company manufactures three products computer paper newsprint and specialty paper in a continuous

U : ux1x2min3x1 6x2 ip1x1p2x2 p1 4 p2 5i 20a write the function for the indifference

Be you apparel inc is considering two investment projects : be you apparel inc. is considering two investment projects. the estimated net cash flows from each project are as

Assume that nominal income is 35000 and the price index is : assume that nominal income is 35000 and the price index is 1.20 in year 1. in year 2 nominal income rises to 38000 and

Jack has a utility function ux1 x2 x1 x2 power of 2the : jack has a utility function ux1 x2 x1 x2 power of 2the price of x1 is 3 and the price of x2 is 1 and jack has an

Market value of the final goods and services produced in : market value of the final goods and services produced in the domestic economy 115000 of which goods worth 10000 are

The market for hamburger flippersprice of labour per hour : the market for hamburger flippersprice of labour per hour nbsp quantity of hours demanded nbspnbsp

As indicated in the following memo lack of information loi : as indicated in the following memo lack of information loi has identified obligations to handle and dispose of asbestos

Cnsider the following simple linear regression modelyi : consider the following simple linear regression model.yi beta1 beta2xi ei i 1... npart i we are trying to find the

User Account

All Pages