Question

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 MU_F=C+1 and MU_C=F. The price of food is P_F, the price of clothing is P_C, 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 C=5/Pc

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 MU_F=C+1 and MU_C=F. The price of food is P_F, the price of clothing is P_C, and the consumer’s income is W.

Which statement is true?

clothing is a Giffen good

clothing is an inferior good

none of the others

clothing is a normal good

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 MU_F=C+1 and MU_C=F. The price of food is P_F, the price of clothing is P_C, and the consumer’s income is W.

Suppose W=10, P_F=4, P_C=6. What is the optimal bundle?

(F,C)=(2,1)

(F,C)=(1/3,1)

(F,C)=(2,1/3)

(F,C)=(1,3)

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 MU_F=C+1 and MU_C=F. The price of food is P_F, the price of clothing is P_C, and the consumer’s income is W.

Suppose W=10, Pf=4 and Pc decreases from 6 to 1.5. What is the income effect of clothing?

6/7

1

3/5

7/6

Answer 1