Question

1. a) Consider the case of a consumer with demands over two goods. Prove that it...

1. a) Consider the case of a consumer with demands over two goods. Prove that it is not possible for both goods to be luxury goods.

b) Demonstrate with a well-labelled diagrammatic example that it is not in general possible to treat aggregate demand as a function of aggregate income. Be clear in your argument - do not simply slap down a picture.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

As you can see there are two luxurious goods in the diagram, so it is not possible to both goods be the luxurious goods because:-

  1. They cannot give the same level of satisfaction to the consumer in the income level.
  2. And also as the income falls it becomes very difficult to the consumer to have two luxurious goods at the same time.
  3. Consumer have to sacrifice for one good to have the maximum satisfaction on the other good.
  4. The luxurious goods demand rises only when the income rises of the consumer and the consumer shifts from normal to luxurious goods as in normal condition's.
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Consider a consumer with Cobb-Douglas preferences over two goods, x and y described by the utility...
Consider a consumer with Cobb-Douglas preferences over two goods, x and y described by the utility function u(x, y) = 1/3ln(x) + 2/3n(y) 1. Assume the prices of the two goods are initially both $10, and her income is $1000. Obtain the consumer’s demands for x and y. 2. If the price of good x increases to $20, what is the impact on her demand for good x? 3. Decompose this change into the substitution effect, and the income effect....
Quantitative Question 2 Consider a situation where a consumer demands two goods, x and z with...
Quantitative Question 2 Consider a situation where a consumer demands two goods, x and z with the utility function U¯ = x 0.2 z 0.8 (a) Derive the marginal rate of substitution (b) Derive the demand functions for x and z as a function of income (Y ), the price of good x, (px) and the price of good z (pz) (c) Let Y = 200, px = 4, and pz = 8. Find the equilibrium quantities demanded for this...
1. Consider a consumer with well-behaved preferences who can spend their income on two goods, 1...
1. Consider a consumer with well-behaved preferences who can spend their income on two goods, 1 and 2. Using a diagram, show how to derive a demand curve for good one. Explain your answer. What factors are held constant when the demand curve is derived?
Consider the problem of a consumer who must choose between two types of goods, good 1...
Consider the problem of a consumer who must choose between two types of goods, good 1 (x1) and good 2 (x2) costing respectively p1 and p2 per unit. He is endowed with an income m and has a quasi-concave utility function u defined by u(x1, x2) = 5 ln x1 + 3 ln x2. 1. Write down the problem of the consumer. 1 mark 2. Determine the optimal choice of good 1 and good 2, x ∗ 1 = x1(p1,...
1. Consider the general form of the utility for goods that are perfect complements. a) Why...
1. Consider the general form of the utility for goods that are perfect complements. a) Why won’t our equations for finding an interior solution to the consumer’s problem work for this kind of utility? Draw(but do not submit) a picture and explain why (4, 16) is the utility maximizing point if the utility is U(x, y) = min(2x, y/2), the income is $52, the price of x is $5 and the price of y is $2. From this picture and...
A consumer’s preferences over two goods (x1,x2) are represented by the utility function ux1,x2=5x1+2x2. The income...
A consumer’s preferences over two goods (x1,x2) are represented by the utility function ux1,x2=5x1+2x2. The income he allocates for the consumption of these two goods is m. The prices of the two goods are p1 and p2, respectively. Determine the monotonicity and convexity of these preferences and briefly define what they mean. Interpret the marginal rate of substitution (MRS(x1,x2)) between the two goods for this consumer.   For any p1, p2, and m, calculate the Marshallian demand functions of x1 and...
1. The household production function shows: A.   the minimum amount of two goods that a consumer...
1. The household production function shows: A.   the minimum amount of two goods that a consumer can purchase with a given money income. B.    all possible combinations of two goods that yield the same level of utility to the consumer. C.    all possible combinations of two goods (household and market)that can be produced, given value of the goods, and market wages. D.   the amount of household good that a consumer is willing to give up to obtain one more unit...
In this question, you will carry out the algebraic equivalent to the diagrammatic analysis investigating the...
In this question, you will carry out the algebraic equivalent to the diagrammatic analysis investigating the effect of amenities on incomes and real-estate prices. To start, let the consumer utility function be given by q1/2c1/2a1/2, where c  is consumption of “ bread ” (a catch-all commodity), q is real estate (housing), and a is amenities, which are valued by the consumer given that a’s exponent is positive. Letting y denote income, it can be shown that the consumer demand functions for...
Read the following case carefully and then answer the questions. In the movie Face/Off, John Travolta...
Read the following case carefully and then answer the questions. In the movie Face/Off, John Travolta got a new look by exchanging faces with Nicolas Cage. Unfortunately, he got a lot of trouble along with it. John could receive a much less troublesome new look by using Botox, a treatment discovered by Vancouver’s Dr. Jean Carruthers, who came upon the cosmetic potential of Botox in 1982 while treating a woman with eye spasms. Botox is marketed by Allergan, a specialty...
CASE STUDY ON LEADERSHIP/ Aidensfield hospital currently faces major problems with staff, management, general performance and...
CASE STUDY ON LEADERSHIP/ Aidensfield hospital currently faces major problems with staff, management, general performance and service quality. It is conceivable that these problems are related to the ‘leadership’ styles adapted by those in charge. The senior management have proposed some changes within the organisation to hopefully make improvements but making such decisions requires an in-depth understanding of what is going wrong and why. Leadership as a concept is often considered in isolation when in reality, it is coherent with...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT