User Account

All Pages

What is smith demand for beer and stamps

Assignment Help Microeconomics
Reference no: EM132484575

Smith's utility function is U(x1, x2) = x1 + ln x2

x1 - stamps x2 - beer

Smith's budget: p1 x1 + p2 x2 = m

p1 - price of stamps p2 - price of beer m - Smith's budget

a) What is Smith's demand for beer and stamps?

b) Is it true that Smith would spend every Taka in additional income on stamps?

c) What happens to demand when Smith's income changes (i.e. find the income elasticity)?

d) What happens to demand when p1 and p2 increase (i.e. find the price elasticities)?

[Hint: For a) Given prices, p1 and p2, find the quantities x1 and x2 which maximise Smith's utility!

Necessary condition: MRS= MU1/MU2; Find MRS; Optimum occurs when x2= p1/p2, Using x2, Find x1 from the given budget line

Reference no: EM132484575

Questions Cloud

Prepare journal entries for each of the transactions : Prepare journal entries for each of the transactions for 2020. Ottawa Enterprises Ltd. reported the following Shareholder's Equity balances at December
What is the elasticity of demand at price and quantity : Based on this information, what price should you charge and what quantity should you produce and sell?
What is the postretirement benefit expense : Compute the postretirement benefit expense for 2017. What is the Postretirement benefit expense? Blue Co. provides the following information
Consumer demand in equilibrium : Suppose the price of Y, PY = 1. Calculate the price of X, PX that will lead to a competitive equilibrium.
What is smith demand for beer and stamps : a) What is Smith's demand for beer and stamps? b) Is it true that Smith would spend every Taka in additional income on stamps?
What haven should report gross profit of : Haven uses the percentage-of-completion method. For the calendar years 2020 and 2021, respectively, Haven should report gross profit of
Characteristics of the utility function : Discuss the relationship between these problems. What characteristics of the utility function are generating this result?
How many years is until the bond matures : Yield to maturity of 7.52 percent. The face value is $1,000. Interest is paid semiannually. How many years is it until this bond matures?
What allocative efficiency means : Perfect Competition is the one industry structure that achieves allocative efficiency. Describe what allocative efficiency means

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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