Solve the budget constraint for x2 as a function of x1

Assignment Help Econometrics
Reference no: EM13243020

A consumer chooses x1 and x2 to maximize U(x1,x2) = log x1 + log x2, subject to the budget
constraint: px1 + x2 = y (note that the price of x2 has been normalized to equal one).

Solve the budget constraint for x2 as a function of x1. Using the substitution method, convert the consumer's optimization problem into a one-dimensional maximization problem, and find the consumer's optimal level of x1 as a function of p and y. Do the same for x2. After, solve the consumer's optimization problem using the Lagrange multiplier method. Interpret the first-order conditions in terms of the slope of budget constraint and indifference curves.

Reference no: EM13243020

Questions Cloud

Demand for money to cover unexpected expenditures : The demand for money to cover unexpected expenditures and to meet emergencies is known as
Explain what is the activation energy for the reaction : A reaction has a rate constant of 7.69 M^-1s^-1 at 219 K and a rate constant of 3.36 *10^4 M^-1s^-1 at 344K. what is the activation energy for this reaction
Explain the concentration of no2 : If the concentration of NO2 is .00556 M at the beginning of the reaction, what will [No2] be after 300 secondd? NO2 (g) arrow NO (g) + O (g)
How much energy is now stored in its magnetic field : Imagine that we connect a 10-mH coil to a battery through a resistor, and it settles down to conducting 1.0A. How much energy is now stored in its magnetic field
Solve the budget constraint for x2 as a function of x1 : Do the same for x2. After, solve the consumer's optimization problem using the Lagrange multiplier method. Interpret the first-order conditions in terms of the slope of budget constraint and indifference curves.
Define what is the rate constant for the reaction : Cycloprpane decomposes in a first-order reaction at 500 C If the cyclopropane concentration is .670 M at the start of the reaction and is .367 M after 900 s, what is the rate constant for the reaction
Is the flexible land-rent function more or less steep : As the flexible farmer approaches the marketplace, the farmer substitutes non-land inputs for land. As a result, the land-rent function of the flexible farmer is steeper than the land-rent function of the inflexible farmer.
How much charge passed : A heart defibrillator passes 10.5 A through a patient's torso for 5.00 ms in an attempt to restore normal beating, How much charge passed
Explain what is the mole fraction of h2 in the mixture : a gas mixture contains 5.6 g of N2, 1.4g of h2, and 27.6 of CH4. What is the mole fraction of h2 in the mixture

Reviews

Write a Review

Econometrics Questions & Answers

  Compute the resulting change in consumer surplus

After the firm's patent expires, predict the new market output and price. (Assume that competing suppliers have the same economic costs as the original producer.) Compute the resulting change in consumer surplus.

  Measure the marginal utility per dollar

Let MUA = z = 10 ? x and MUB = z = 21 2y, where z is marginal utility per dollar measured in utils, x is the amount spent on product A, and y is the amount spent on product B. Assume that the consumer has $10 to spend on A and B-that is, x + y = 1..

  Determine the present worth of gas

The utility estimates that by switching to gas, it will save $22,000 per year, starting 3 years from now. At an interest rate of 8% per year, determine the present worth in year 0 of the projected savings that will occur in years 3 to 10.

  Analyze the optimal solution

Solve the following linear programming model graphically. In addition, write the problem in standard form and do a constraint analysis for the optimal solution. Minimize 10x + 15y Subject to 5x + 2y ? 40 x + 2y 0

  Calculate the elasticity coefficient for each price level

Using the midpoints formula presented in the text, calculate the elasticity coefficient for each price level, starting with the coefficient for the $4 to $6 level. For each coefficient, indicate what type of elasticity is indicated, elastic demand..

  Compute the profit maximization level of price and output

the industry demand function for bulk plastics is represented by the following equation p = 800 - 20Q where Q represents millions in pounds of plastic the total cost function for the industry, exclusive of a required return on invested capital is ..

  Find the long-run values of r-c-i-p and v

assume that the government decides toreduce spending and taxes and so G = T = 274.16. What value mustthe central bank set for M in order to keep the price levelconstant following the government downsizing

  Determine what is the after tax initial investment

A current asset (defender) is being evaluated for potential replacement. It was purchased four years ago at a cost of $62,000. It has been depreciated as a MACRS (GDS) five-year property- class asset. The present MV of the defender is $12,000.

  What promised payment will savers require

a safe firm and a risky firm. Each firm needs to borrow the same amount of funds to start a project. The safe firm knows with certainty that it will see a 30 percent return on the project (i.e., for each $100 borrowed, the safe firm will see rev..

  What is opportunity cost of producing additional silk roses

Bella can produce either a combination of 60 silk roses and 80 silk leaves or a combination of 70 silk roses and 55 silk leaves. If she now produces 60 silk rose 80 silk leaves, what is the opportunity cost of producing additional 10 silk roses

  Compute the value of the test statistic

The amount of water consumed each day by a healthy adult follows a normal distribution with a mean of 1.54 liters. A sample of 10 adults after the campaign shows the following consumption in liters: 1.35 1.68 1.76 2.00 1.84 1.84 1.50 1.82 1.86 1.6..

  What should be the transfer price of the pocket calculators

The plant has a capacity output of 200,000 calculators per year, and the plant's manager regards 75 percent of capacity as the normal or standard output. The projected total variable costs for the normal or standard level.

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