and hence so the substitution effect is h₁ (p, u) = = Ә др1 -e(p, u) Əh₁ 3 дрг 4 = = 3 2 2 = 4 V 3³ 4 V 3 2 The Marshallian demand is x1(p, w) = h₁ (p, v(p, w)) is equal to the substitution effect. Therefore, the income effect is 0. = " and hence the total effect
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- Which of the following is an important difference between Marshallian demand and Hicksian demand? Marshallian demand focuses on utility maximisation, whereas Hicksian demand focuses on income minimisation. Marshallian demand focuses on maximising total utility, whereas Hicksian demand focuses on maximising marginal utility. O Hicksian demand considers the substitution effect only, while Marshallian demand takes into account both the income and substitution effects. Marshallian demand takes the concept of 'inferior goods' into account, whereas Hicksian demand does not. O More than one of the above.The demand for lobster is represented as follows, where Qis measured in pounds of lobster: Q, =100 – 75P+91P, – 80P. +25Y where P is the price per pound of lobster, Ps is the price per pound of shrimp, Pc is the price per dozen of corn ears, and Y is income, measured as the median hourly wage of consumers. Suppose that the price of a pound of shrimp is $10, the price of corn is $5 per dozen, and the median hourly wage for customers in this market is $25. Further, suppose that the current equilibrium price for lobster is $13 per pound. Find the equilibrium quantity demanded of lobster in this market. Now determine the following elasticities: price elasticity of demand for lobster; cross-elasticity of demand for lobster relative to shrimp; and income elasticity of demand for lobsters. Is demand for lobsters (relative to the price of shrimp) elastic, inelastic, or unit elastic? Based on the cross-elasticity of demand for shrimp you found, is shrimp a reasonably good substitute for…Explain with the aid of well labelled diagram(s) with before and after transitions whether the statement below is True, False or Cannot be determined, given the information provided: “Two commodities, P and Q are perfect substitutes with per unit prices of $PP and $PQ respectively. The income of an individual is given by $I. It is also given that initially, $PP = $PQ. Then it can be reasonably claimed that in a specific situation where $I remains unchanged and due to some exogenous factor, $PP < $PQ, then the budget line, which initially was overlapping an indifference curve will pivot, become flatter and resultantly, the optimal bundle will be always be a corner solution at (0,Q*) and no other possibility would exist.
- 1. Using the Marshall and Hicksian Demand Identity Equation, derive the Slutsky equation to determine whether x1 and x2 are complements or substitutes. That is, derive the following Slutsky equation:The demand equation for a particular candy bar is px + x + 20p = 3000where 1000x candy bars are demanded per week when p cents is the price per bar. If the current price of the candy is 49 cents per bar and the price per bar is increasing at the rate of 0.2 cent each week, find the rate of change in the demand.KL Let Y = (8K? + 7L2) 1/2 (a) Find RLK= YK/Y', the marginal rate of substitution of L for K. YK RLK= (b) Find oLK= Elp (LIK), the elasticity of substitution between L and Kalong a level curve for Y. LK OLK= ERK (L/K)=
- Goods x and y are perfect substitutes. When the market price of good x is $5/unit, firm F produces 500 units of x. When the price of y rises, 100 consumers of y shift to the consumption of good x. This causes industry analysts to believe that firm f has increased quantity supplied of x by 100 units to meet the higher demand for it. To arrive at this conclusion, the industry analysts are assuming that a. Good x is the only substitute of y available to them. b. Each person will now buy more of x than they did prior to the increase in the price of y. c. Good y is an inferior good. d. The law of supply does not hold for good y. e. The new buyers of good x will, on average, consume one unit each. It’s apparently not b.1. Given the demand function for beef is Qx= 300-10 0Px+60Pp+0.01Y, where Qx is the tons of beef demanded in your city per week, Px is the pric e per pound of beef, Pp is the price per pound of pork, and Y is the average household income in t he city. The supply of beef function is Qx= 200+150P-30C, where Qx is the tons of beef supplied in your city per week, Px is the price of beef per pound, and C is the cost of feed for cows. Assume initially, the price of pork (Pp) is $3 per pound, Y=$50,000, and C=$5. a. Find the demand function Qd the given price of p ork (Pp) and income (Y) and find the supply function at the given cost of feed per pound (C). b. What is the equilibrium price per pound and quan tity demanded of beef? c. What is price elasticity of demand for beef? Is the demand for beef price elastic d. As the manager of the beef business, should incr ease or decrease the price of beef if objective is to increase your operating revenue? e. What is the cross-price elasticity…Suppose that the demand function is given as follows: 0 =1440– 3P +P, -I and Q, --240+ P where P denotes pnice of good x P, denotes the price of a related product y, I denotes income. a-) Find equilibnunm price and output (P and O) as a function of exogenous variables income () and price of the related product (P, ). Usng comparative statics, find how the equilibrium price and output change as Price of the related product ((P.) and income (I) change (ie find -) Support your findings with graphs (how demand and supply are affected?) Are goods x and y complements or substitutes? Is good x a nomal good or an inferior good?
- Assume that a retailer sells 1000 six packs of Pepsi per day at at $3./6pk. You, as an economic analysis , estimate that the cross price elastcity between pepsi and coca cola is 0.4. If the retailer raises the price of coca cola by 10%, how would sales of pepsi be affected, ceteris paribus, whyThe demand function for a certain product is given by 1000 P- 500 + 9+1. where p is the price and q is the number of units demanded. Using the average value function given in the text to find the average price as demand ranges from 46 to 96 units, what are the values of a and b? 46 %3B b-96 Calculate 1/50 Find the average price as demand ranges from 46 to 96 units. (Round your answer to the nearest cent.) $618.13 Need Help? ReatMorgan has the following utility function: u(x, y) = 5 ln(x) + 3y. Her income is given by I = 15 and the prices originally are pr = 2 and py = 3. = (a) What are Morgan's Marshallian demands? (b) How much of each good is Morgan currently consuming? (c) What is the utility level that Morgan can achieve? (d) Assume the price of x increases to p = 4, find Morgan's new levels of consumption. X X (e) Find the total, substitution and income effects for good x caused by the price change. Consider this price change a "large" price change (Apz = Pz - Px=4-2=2).