Question

Daniel derives utility from only two goods, cake (X) and donuts (Y). His utility function is:

U=XY. The marginal utility that Daniel recieves from cake (MUx) and donuts (MUy) are given as follows:

MUx= Y MUy = X

Daniel has an income of $240 and the price of cake (Px) and donuts (Py) are both $3.

Question 7: See Scenario 2. Suppose price of X increases from $3 to $4. What quantities of X and Y will Daniel now purchase?

a) x=7.5, y=10

b) x=10, y=7.5

c) x=3, y=3

d) x=10, y=10

e) none of the above

Question 25: What is Daniel's income-consumption curve when his income is $60?

a) x=7.5, y=10

b) x=10, y=7.5

c) x=3, y=3

d) x=10, y=10

e) none of the above

Question 27: The Price Effect of increase in the price of X from $3 to $4 is:

a) -7.5

b) 7.5

c) -2.5

d) 2.5

Answer 1