Question

T/F/U: Garrett's utility function is U(a,b) = a*b, where a is his consumption of apples and b is his consumption of bananas. If prices and income change in such a way that Garrett's old consumption lies on his new budget line, then Garrett will not change his consumption bundle. (Draw Garrett's budget line and some indifference curves to illustrate your answer.)

Answer #1

Answer: **False**

Suppose that a consumer gains utility from apples and bananas
according to the utility function: U(A,B)=A^2 ×B
a)Suppose A = 2 and B = 1. What is the marginal utility of each
good?
b)For the consumer’s utility, how valuable are apples relative to
bananas? That is, what is the MRS?
c)Suppose PA = 2 and PB = 1. How valuable are apples relative to
bananas in the marketplace? That is, what is the price ratio?
d)Suppose A = 2, B...

George is making a consumption choice over apples (a) and
bananas (b). George’s preferences are represented by u (a, b)
=(2a^2)b where a > 0 and b > 0. Denote by f = (a, b) a fruit
bundle.
1. In terms of preference relations, how does George rank the
three bundles f1 = (3, 1), f2 = (1, 3), and f3 = (2, 2) relative to
each other?
2. State George’s marginal rate of substitution (MRS) function,
MRS(a, b) (where...

3. Nora enjoys fish (F) and chips(C). Her utility function is
U(C, F) = 2CF. Her income is B per month. The price of fish is
PF and the price of chips is PC. Place fish
on the horizontal axis and chips on the vertical axis in the
diagrams involving indifference curves and budget lines.
(a) What is the equation for Nora’s budget line?
(b) The marginal utility of fish is MUF = 2C and the
Marginal utility of chips...

Evelyn eats only apples and bananas. Suppose Evelyn has the
following utility function: ?(??, ??) = ????.
a. Evelyn currently has 40 apples and 5 bananas. What is
Evelyn’s utility at this bundle? Graph the indifference curve
showing all bundles that Evelyn likes exactly as well as the bundle
(40, 5).
b. Norah offers to trade Evelyn 15 bananas if she will give her
25 apples. Would Evelyn take this trade? Explain.
c. What is the largest number of apples...

immy's utility function is U =
Apple x Banana. The price of
apples used to be $4 per unit and price of bananas $1 per unit. His
income is $160 daily. If the price of apples decreases to $2 and
the price of banana stays the same. In order to be able to just
afford his old bundle before prices change, Jimmy's would have to
have a daily income of: ______
Referring to question 10, the substitution
effect of the...

Suppose that Ken cares only about bathing suits (B) and
flip-flops (F). His utility function is U = B^0.75*F^0.25. The
price of bathing suits are $12, and the price of flip-flops are $6.
Ken has a budget of $240.
(a) (4 points) Draw and label a graph containing Ken’s budget
line with bathing suits (B) on the x-axis and flip-flops (F) on the
y-axis. Graph the x and y intercepts and determine the slope of the
budget line.
(b) (4...

Jimmy's utility function is U =
Apple x Banana. The price of
apples used to be $4 per unit and price of bananas $1 per unit. His
income is $160 daily. If the price of apples decreases to $2 and
the price of banana stays the same.
1.In order to be able to just afford his old bundle before
prices change, Jimmy's would have to have a daily income of:
______
2.The substitution effect of the decrease in
price of...

Scenario 5
Charlie has the utility function U ( X A , x B ) =
X1/2A X1/2B
where XA stands for the number of apples and
XB stands for the number of bananas consumed.
Refer to Scenario 5.
- Putting apples on the x-axis, and bananas on the y-axis, what
is the equation for the Marginal Rate of Substitution (MRS)?
Refer to Scenario 5.
- His indifference curve passing through 36 apples and 4 bananas
will also pass through...

Jen’s utility function is U (X, Y ) = (X + 2)(Y + 1), where X is
her consumption of good X and Y is her consumption of good Y .
a. Write an equation for Jen’s indifference curve that goes
through the point (X, Y ) = (2, 8). On the axes below, sketch Jen’s
indifference curve for U = 36
b. Suppose that the price of each good is 1 and that Jen has an
income of 11....

Chester consumes only bread (b) and cheese (c); his utility
function is U(b,c) = bc. In Chester’s town, cheese is sold in an
unusual way. The more cheese you buy, the higher the price you have
to pay. In particular, c units of cheese cost Chester c2 dollars.
Bread is sold in the usual way (i.e., at a constant price) and the
per-unit price of bread is pb > 0. Chester’s income is m
dollars.
(a) Write down Chester’s budget...

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