please only do: if you can teach explain steps A consumer has utility functionu(x₁, x2) = (x₁ - C₁) (x₂ - 0₂)where c₁ and ₂ are positive constants.(a) Are this consumer's preferences monotone?Solution: No. Differentiating gives = x2-02, which is negative for x2 < c₂.(b) Find this consumer's Hicksian demands and expenditure function if she must choose1₁ ≥ ₁ and 2₂ ≥ 02. Explain briefly how you would check that your solution is optimal(you do not actually have to check it).Solution: The expenditure minimization problem ismin p₁æ1+p2æ2 s.t (₁-₁)(x₂ - 0₂) ≥ u.Since preferences are monotone for x₁ ≥ c₁ and x₂ ≥ c2, the constraint binds. Thefirst-order conditions areand thereforeP1 = √(x₂ - 0₂)and p2= (₁-C₁).Dividing the two conditions gives21 C1P2X2 C2 P1Substituting back into the constraint givesP2 (x₂-0₂)² = uP1h₂(p, u) = c₂ +piùP2

Introduction One of the assumptions that aids customers in decision-making are "Completeness and…

A consumer has utility function u(T₁, 12) = (11 — C₁) (12 - 0₂) where c₁ and ₂ are positive constants. (a) Are this consumer's preferences monotone? Solution: No. Differentiating gives = 12 - C2, which is negative for 12 < €2. (b) Find this consumer's Hicksian demands and expenditure function if she must ch 1₁ ≥ 4₁ and 1₂ ≥ 0₂. Explain briefly how you would check that your solution is opti (you do not actually have to check it). Solution: The expenditure minimization problem is min p₁z₁+p2x2 st (₁-C₁) (12 - 0₂) ≥ u.

A consumer has utility function u(T₁, 12) = (11 — C₁) (12 - 0₂) where c₁ and ₂ are positive constants. (a) Are this consumer's preferences monotone? Solution: No. Differentiating gives = 12 - C2, which is negative for 12 < €2. (b) Find this consumer's Hicksian demands and expenditure function if she must ch 1₁ ≥ 4₁ and 1₂ ≥ 0₂. Explain briefly how you would check that your solution is opti (you do not actually have to check it). Solution: The expenditure minimization problem is min p₁z₁+p2x2 st (₁-C₁) (12 - 0₂) ≥ u.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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3- Assuming that the equation F(U, x, X2 = f(x1, x2,, ... Xn): ******* **** ,xn) = 0 implicitly defines a utilityfunction U 073 a) Find the expressions for 60, 6U and 6x4 " 3 6x2 6xn 6x2 6xn b) Interpret their respective economic meanings. c) Now. assume the utility function is U(x, y) = y√x. Does the consumer believe that more is better for each good? Do the consumer's preferences exhibit a diminishing marginal utility of x? Is the marginal utility of y diminishing?
Eren’s two main hobbies are taking vacations overseas (V) and eating expensivemeals (M). His utility function is given as: U(V,M) = V2MLast year, the average price of taking a vacation overseas was US$200 and the averageprice of an expensive meal is $50. However, due to supply problems in Onions, theaverage price of an expensive meal rose to $75. The average price of a vacation did notchange. His income, which is $1500, did not change. Suppose that the Department of Welfare wants to know how much should begiven to Eren to offset his change un utility due to the price increase of an expensivemeal. Calculate the compensative variation (CV).
Eren’s two main hobbies are taking vacations overseas (V) and eating expensivemeals (M). His utility function is given as: U(V,M) = V2MLast year, the average price of taking a vacation overseas was US$200 and the averageprice of an expensive meal is $50. However, due to supply problems in Onions, theaverage price of an expensive meal rose to $75. The average price of a vacation did notchange. His income, which is $1500, did not change. Calculate for the equivalent variation (EV) for the price change.
Eren’s two main hobbies are taking vacations overseas (V) and eating expensivemeals (M). His utility function is given as: U(V,M) = V2MLast year, the average price of taking a vacation overseas was US$200 and the averageprice of an expensive meal is $50. However, due to supply problems in Onions, theaverage price of an expensive meal rose to $75. The average price of a vacation did notchange. His income, which is $1500, did not change. Calculate the change in consumer surplus from consuming the expensivemeals considering the price change (Hint: you need to compare his optimalconsumption bundle before and after the price change to get the change in CS).
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What is the logarithmic transform of the utility function U=xα1xβ2xγ3U=x1αx2βx3γ given the budget constraint px1x1+px2x2+px3x3=Mpx1x1+px2x2+px3x3=M. Select one: a. ln U=ln xα1+ln xβ2+ln xγ3ln U=ln x1α+ln x2β+ln x3γ b. ln U=α ln x1−β ln x2−γ ln x3ln U=α ln x1−β ln x2−γ ln x3 c. ln U=α ln x1+β ln x2+γ ln x3ln U=α ln x1+β ln x2+γ ln x3 d. ln U=ln xγ1+ln xβ2+ln xα3
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