Reference no: EM13105571
For the following demand function.
for values of m > 1.
a. Obtain Income elasticity of demand. Plot the Engel curve for p1 = 1.
b. Is this a normal good?
c. Assuming that preferences are monotonic (then the individual always spends all its income), use the budget constraint to solve for x2* (p1, p2, m).
d. The consumer faces the following prices and income level.
prices p1 = 1, p2 = 1.5 and income m = 5.
Calculate the quantity demanded for goods 1 and 2 at these prices and this income level.
e. Obtain income and substitution effects with Slutsky compensation when the price of good 1 drops to pi = 0.5
Part-2
Assume preferences can be represented by the following utility function.
a. Is the utility function monotonic? Justify.
b. Set up the consumerís utility maximization problem for prices p1, p2 and income m (the general case)
c. Solve the problem. You will obtain demand functions x1* (p1, p2, m) and x2* (p1, p2, m) in terms of the parameters (p1, p2, m).
d. Graph the demand function for good 1 when the price of good 2 is p2 = 2 and income is m = 200.
e. Obtain the change in consumer surplus when the price of good 1 goes from p1 = 2 to p1 = 4.
f. Again, assuming the price of good 1 increases to pi = 4. Find the Compensating and the Equivalent Variations
g. For the same price increase, obtain the income and substitution effects on good 1, both with Slutsky and Hicks compensations.
|
Compute operating characteristics of customers line
: Agan Interior Design provides home and office decorating assistance to its customers. In normal operation, an average of 2.5 customers arrive each hour.
|
|
Illustrate what usage time guarantee in hours
: illustrate what usage time guarantee (in hours) should the manufacturer advertise in order to ensure that only 4% of the cartridges fail to meet the guaranteed usage time?
|
|
How decrease overall demand for gasoline in community
: Consider the full range of potentials from the availability of bike paths to the cost of car insurance. Develop a conservation strategy that you think could decrease overall demand for gasoline in your community. Who if anyone must implement it? W..
|
|
Whose monthly initial payments were higher
: These loans were provided to many borrowers who may not have qualified for traditional fixed rate loans, whose monthly initial payments were higher.
|
|
Obtain income elasticity of demand
: Obtain Income elasticity of demand and Calculate the quantity demanded for goods 1 and 2 at these prices and this income level.
|
|
Determine the average waiting time in minutes
: The reference desk of a university library recives requests for asssistance. Assume that a poisson probability distribution with an arrival rate of 10 requets per hour.
|
|
Information about population
: This question is asking for speculation about the possible results of a study if we change the size of the population. It all depends on unknowns such as how representative the 100 adults are of the population.
|
|
Illustrate what apr should friendly quote
: this means you get 3$ today and repay 4$ when you get your check in one week. Illustrate what is the EAR friendly earns? Illustrate what APR should Friendly quote?
|
|
Evaluate costco''s strategy in terms of pricing
: Make a response to the questions below about Costco Wholesale, Deliberate and evaluate Costco's strategy in terms of pricing, product selection and marketing and advertising strategy.
|