What is minimum income necessary to achieve total utility

Assignment Help Business Economics

Reference no: EM131082073

1) A consumer has preferences for apples (A) and Oranges (Or) given by the utility function U(A,Or) = log(A) / 2 + log(Or) where log() is the natural logarithm function. The Marginal Utility for A is 1/2A and the marginal utility for Or is 1/Or. The price of A is $1 and the price of Or is $2 per unit, and this consumer will devote $10 of his income to both goods. What is the optimal consumption of Or?

2) What is the total effect of a reduction in the price of Or to $1?

3) Make a graph showing the total effect you found in the previous question.

4) Suppose prices are like in problem 2. What is the minimum income necessary to achieve a total utility of 1.98?

5) What is the income and substitution effect? (Essentially you have to do the same thing you did in problem 4 but achieving the utility obtained with the original prices). Make a graph showing both effects.

Could you show me each answer step by step?

Reference no: EM131082073

Questions Cloud

What is the corresponding optimal block pricing scheme : Suppose we have two types of consumers (for simplicity we’ll assume that there is one person of each type). They have inverse demand curves given by: What is the corresponding optimal block pricing scheme? Now suppose that the monopolist cannot tell ..

Creating flow charts : You're desperately in love with another person, but that person doesn't know you exist. You decide to skip the whole getting-to-know-you routine, and cast a love spell.

Licensing proprietary technology to foreign competitors : Licensing proprietary technology to foreign competitors is the best way to give up a firm's competitive advantage. Discuss whether you agree or disagree with this statement.

Pricing strategy would these firms consider : Two competing soft-drinks firm Cepsi and Poke are entering a new market where neither has been sold before. What type of LR pricing strategy would these firms consider?

What is minimum income necessary to achieve total utility : A consumer has preferences for apples (A) and Oranges (Or) given by the utility function U(A,Or) = log(A) / 2 + log(Or) where log() is the natural logarithm function. The Marginal Utility for A is 1/2A and the marginal utility for Or is 1/Or. What i..

Discussing authentic leadership : "The Empty Carriage: Lessons in Leadership from Florence Nightingale" why this article is relevant today when discussing Authentic Leadership?

Write program that play rock-paper-scissors-lizardspock game : Write a program that plays the Rock-Paper-Scissors-Lizard-Spock game. Refer to http://en.wikipedia.org/wiki/Rock-paper-scissors-lizard-Spock for more information.

What are transfer payments : What are transfer payments, and how do they make their way into the GDP calculation? If one added up the value of all intermediate goods that went into the production of real GDP, the total value of intermediate goods would be

Find an equation describing the plane passing through point : Quiz 2. Find an equation describing the plane passing through the point (1, -1, -1) and parallel to the plane 5x - y - z = 6

User Account

All Pages