Question

In a two goods (x and y) world, two districts (A and B) are identical, except...

In a two goods (x and y) world, two districts (A and B) are identical, except the price of good x (Px) is higher in district A. Suppose two identical individuals (i.e. same preferences and income) live in the two districts separately and their optimal choices are interior solutions. Evaluate the following statement: ‘The MRS at the optimal choices of two individuals can be the same’. True, false, or uncertain? Explain your answer intuitively and graphically.

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
In a two goods (x and y) world, two districts (A and B) are identical, except...
In a two goods (x and y) world, two districts (A and B) are identical, except the prices of good x (Px) and good y (Py) are higher and lower in district A, respectively. Suppose two identical individuals (i.e. same preferences and income) live in the two districts separately and their optimal choices are interior solutions. Evaluate the following statement: ‘The MRS at the optimal choices of two individuals are the same’. True, false, or uncertain? Explain your answer intuitively...
Tom spends all his $100 weekly income on two goods, X and Y. His utility function...
Tom spends all his $100 weekly income on two goods, X and Y. His utility function is given by U(X,Y) =XY. If Px=4 and Py=10 a) how much of each good should the buy? Please show graphically (specify clearly x-axis and y-axis and intercepts of each axis) b) Same as Problem 1, except now Tom’s utility function is given by U(X,Y) = X^1/2 Y^1/2 c) Find the MRS at the tangent points (optimal point) in a and b. Can you...
Jasina has preferences for two goods  x, y and her marginal rate of substitution (MRS) between x...
Jasina has preferences for two goods  x, y and her marginal rate of substitution (MRS) between x and  y  is given by  3y/x. Her budget constraint takes the form  m ≥ pxx + pyy,   where  m is income and  px, py   are the prices of  x,  y respectively. (a) Someone says that Jasina’s expenditure on y  (i.e., pyy) is always one third of her expenditure on  x  (i.e., pxx).   Is this correct? Are x  and  y normal goods? (b) Jason has different preferences to Jasina: his marginal rate of substitution (MRS) between  x and  y is...
1. Emily has preferences for two goods x, y while her marginal rate of substitution (MRS)...
1. Emily has preferences for two goods x, y while her marginal rate of substitution (MRS) between x and y is given by 3y/x. Her budget constraint is m ≥ pxx + pyy, where m = income and px, py are prices of x, y respectively. (a) Emily's expenditure on y (i.e., pyy) is 1/3 of her expenditure on x (i.e., pxx). Is this true Are x and y normal goods? (b) Andrew has different preferences: his marginal rate of...
Jasina has preferences for two goods x, y and her marginal rate of substitution (MRS) between...
Jasina has preferences for two goods x, y and her marginal rate of substitution (MRS) between x and y is given by 3y/x. Her budget constraint takes the form m ≥ pxx + pyy, where m is income and px, py are the prices of x, y respectively. (Word limit per question: 400 words (200 words per part of question). (a) Someone says that Jasina’s expenditure on y (i.e., pyy) is always one third of her expenditure on x (i.e.,...
4.   Consider an individual making choices over two goods, x and y with prices px =...
4.   Consider an individual making choices over two goods, x and y with prices px = 3 and py = 4, and who has income I = $120 and her preferences can be represented by the utility function U(x; y) = x2y2.  Suppose the government imposes a sales tax of $1 per unit on good x: ( Hint: You need to find the initial, final, and hypothetical optimal consumption bundles, their corresponding maximized utility levels and/or minimized expenditure and compare. )...
Consider a Ricardian environment. Two countries (A and B) make two goods (X and Y). Country...
Consider a Ricardian environment. Two countries (A and B) make two goods (X and Y). Country A has 60 units of labor and country B has 120 units of labor. The unit labor requirements are as follows: X Y Country A 1 2 Country B 2 3 a. Draw the PPF for each country b. Calculate the autarky prices for each country (Px/Py) c. Which country has an absolute advantage in good X? Good Y? Which has a comparative advantage...
Consider an individual making choices over two goods, x and y with prices px = 3...
Consider an individual making choices over two goods, x and y with prices px = 3 and py = 4, and who has income I = 120 and her preferences can be represented by the utility function U(x,y) = x2y2. Suppose the government imposes a sales tax of $1 per unit on good x: (a) Calculate the substitution effect and Income effect (on good x) after the price change. Also Illustrate on a graph. (b) Find the government tax revenues...
Suppose there are two consumers, A and B, and two goods, X and Y. The consumers...
Suppose there are two consumers, A and B, and two goods, X and Y. The consumers have the following initial endowments and utility functions: W X A = 2 W Y A = 9 U A ( X , Y ) = X 1 3 Y 2 3 W X B = 6 W Y B = 2 U B ( X , Y ) = 3 X + 4 Y Suppose the price of X is PX=2 and the...
2. Consider an economy with two goods, x and y with prices px and py, respectively....
2. Consider an economy with two goods, x and y with prices px and py, respectively. We observe the following choices made by Rob: if px > py he chooses to consume only y, and if py > px he chooses to consume only x. Suggest a utility function for Rob that represents preferences consistent with the given data. (5m) 3. Consider a market for used cars. There are many sellers and even more buyers. A seller values a high...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT