Question

Peter consumes two goods, food (F) and clothes (C). His utility function is given by U (F, C) =FC^2. The price for one unit of food is pF = 1€, while the price for one unit of clothes is pC = 0.5€ and Peter’s income is 120€.

A) Which market basket maximizes Peter’s utility under the budget constraint?

B) Derive Peter’s individual demand curve of clothes.

C) How does Peter’s budget constraint change if the price of clothes increases to 1€

Answer #1

A consumer purchases two goods, food (F) and clothing (C). Her
utility function is given by U(F,C)=FC+F. The marginal utilities
are MUF=C+1 and MUC=F. The price of food is PF, the price of
clothing is PC, and the consumer’s income is W. Suppose W=10, PF=4,
PC=6. What is the optimal bundle?
Group of answer choices
(F,C)=(1/3,1)
(F,C)=(2,1)
(F,C)=(2,1/3)
(F,C)=(1,3)

Complete the parts below:
A consumer purchases two goods, food (F) and clothing (C). Her
utility function is given by U(F,C)=FC+F. The marginal utilities
are MUF=C+1 and MUC=F. The price of food is
PF, the price of clothing is PC, and the
consumer’s income is W.
Suppose W=10. What is the demand curve for clothing?
The demand for clothing is C=(10-Pc)/2Pc
The demand for clothing depends on both prices
It’s a downward sloping straight line
The demand for clothing is...

Let U (F, C) = F C represent the consumer's utility function,
where F represents food and C represents clothing. Suppose the
consumer has income (M) of $1,200 , the price of food (PF) is $10
per unit, and the price of clothing (PC) is $20 per unit. Based on
this information, her optimal (or utility maximizing) consumption
bundle is:

Julio receives utility from consuming food (F) and clothing
(C) as given by the utility function U (F,C) = FC. In addition,
the price of food is $2per unit, the price of clothing is $6 per
unit, and Julio's weekly income is $50.
Suppose instead that Julio is consuming a bundle with more food
and less clothing than his utility maximizing bundle. Would this
marginal rate of substitution of food for clothing be greater than
or less than your answer...

[Utility Maximization] Mary spends her income on housing (H) and
food (F). Her utility function is given by: U(H, F) = 3HF − H + F
Suppose the price of food is $1 per unit and the price of housing
is $2 per unit. Assume her income is $9.
a) Write down Mary’s budget constraint and find the expression
for her marginal rate of substitution (MRS(HF)).
b) Assume the optimal choice of (H*,F*) is not a corner
solution. Write the...

Ron consumes two goods, X and Y. His utility function is given
by U(X,Y) = 44XY. The price of X is $11 a unit; the price of Y is
$8 a unit; and Ron has $352 to spend on X and Y.
a. Provide the equation for Ron’s budget line. (Your answer for
the budget line should be in the form Y = a – bX, with specific
numerical values given for a and b.)
b. Provide the numerical value...

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
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Chester consumes only bread (b) and cheese (c); his utility
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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
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dollars.
(a) Write down Chester’s budget...

Eric consumes only books and wine. His utility function is
given by: U (B,W)= B.5W.5
Each unit of book costs him $12 and
the price of a bottle of wine is $15. His income is $240.
(I) Write the equation of Eric’s budget constraint.DRAW his
budget constraint with books on the vertical axis and wine on the
horizontal axis.
(II) What is Eric’s total spending on books when he maximizing
utility?
(III) Find the utility maximizing choice of bundle?
(IV)...

1. Suppose that Cathy consumes two goods: beef (b) and cabbage
(c). Her utility function is U = b^1/3 c^2/3 . The price of beef is
$9/lb and the price of cabbage is $3/lb. Cathy has $72. (a) What is
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