Charlie consumes apples and bananas.His utility function is U(XA, XB)=xAx2B.The price of apples is $1 the price of bananas is $2, and his income is $30 per week.If the price of bananas falls to $1

A) Charlie demands fewer apples and more bananas. B) the substitution effect of the fall in banana prices reduces his apple consumption, but the income effect increases his apple consumption by the same amount. C) the substitution effect of the fall in the price of bananas reduces his banana consumption but the income effect increases his banana consumption by enough so that his banana consumption rises. D) the income used to calculate the substitution effect is higher than his original income, since the change made Charlie better off. E) More than one of the above is true. A) Charlie demands fewer apples and more bananas. B) the substitution effect of the fall in banana prices reduces his apple consumption, but the income effect increases his apple consumption by the same amount. C) the substitution effect of the fall in the price of bananas reduces his banana consumption but the income effect increases his banana consumption by enough so that his banana consumption rises. D) the income used to calculate the substitution effect is higher than his original income, since the change made Charlie better off. E) More than one of the above is true.

Ben consumes two goods and his utility function is U(x1, x2)=x21x42.The price of good 2 does not change and his income does not change, but the price of good 1 decreases.

A) The income effect is zero, since his income remained constant. B) The substitution effect on the demand for good 2 is zero, since the price of good 2 did not change. C) The substitution effect reduces the demand for good 2, and since the income effect is zero, the demand for good 2 falls. D) The substitution effect of the price change reduces the demand for good 2 and increases the demand for good 1. E) More than one of the above statements is true. A) The income effect is zero, since his income remained constant. B) The substitution effect on the demand for good 2 is zero, since the price of good 2 did not change. C) The substitution effect reduces the demand for good 2, and since the income effect is zero, the demand for good 2 falls. D) The substitution effect of the price change reduces the demand for good 2 and increases the demand for good 1. E) More than one of the above statements is true.

Exam 7: Slutsky Equation-Part A

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Neville from your workbook has a friend named Peregrine.Peregrine has the same demand function for claret as Neville, namely q = .02m - 2p, where m is income and p is price.Peregrine's income is $6,500 and he initially had to pay a price of $50 per bottle of claret.The price of claret rose to $60.The substitution effect of the price change

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Gladys loves music and spends her money only on tapes and compact discs.She is always willing to trade 2 tapes for 1 compact discs.Originally, music stores sold compact disc for $9 each and tapes for $5 each.Then the price of compact discs fell to $8 each.The change in her consumption of compact discs that resulted was

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The Slutsky substitution effect measures the movement between two points on the same indifference curve.

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Waldo consumes only apples and bananas and bananas are an inferior good for him.The price of apples increases, but there is an increase in his income that keeps him on the same indifference curve as before.(Waldo has convex preferences, and he prefers more to less of either good.)

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Question 4

A consumer has the utility function U(x, y)= x + 2y^1/2.The price of good x is 2 and the price of good y is 1.The consumer's income is 20.If the price of good y rises to 2, then entire change in demand for y is due to the substitution effect.

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Question 5

When the price of x rises, Marvin responds by changing his demand for x.The substitution effect is the part of this change that represents his change in demand

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Question 6

Charlie's utility function is x_Ax_B.The price of apples used to be $1, the price of bananas used to be $2, and his income used to be $40.If the price of apples increased to $5 and the price of bananas stayed constant, the substitution effect on Charlie's apple consumption would reduce his consumption by

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Question 7

Suppose that Agatha has $825 to spend on tickets for her trip.She intends to spend the entire amount $825 on tickets and prefers traveling first class to traveling second class.She needs to travel a total of 1,500 miles.Suppose that the price of first-class tickets is $.60 per mile and the price of second-class tickets is $.30 per mile.How many miles will she travel by second class?

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Question 8

A Giffen good must be an inferior good.

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Question 9

Carlos consumes only two goods, apples and bananas.His utility function is given by U(x, y)=a³b².He is endowed with w_a apples and w_b bananas.Unaware that prices are about to change, Carlos buys the quantities of apples and bananas that maximize his utility subject to his budget constraint.After he has made his purchases but before he has eaten them, the relative prices change.Carlos is then free to make further trades at the new relative prices if he wishes.

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Question 10

Suppose that Agatha has $465 to spend on tickets for her trip.She intends to spend the entire amount $465 on tickets and prefers traveling first class to traveling second class.She needs to travel a total of 1,500 miles.Suppose that the price of first-class tickets is $.40 per mile and the price of second-class tickets is $.10 per mile.How many miles will she travel by second class?

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Question 11

What conditions ensure that the quantity of a good demanded increases as its price falls? Explain your answer, using diagrams.

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Question 12

Carlos consumes only two goods, apples and bananas.His utility function is given by U(x, y)= min{x, 2y}.He is endowed with w_a apples and w_b bananas.Unaware that prices are about to change, Carlos buys the quantities of apples and bananas that maximize his utility subject to his budget constraint.After he has made his purchases but before he has eaten them, the relative prices change.Carlos is then free to make further trades at the new relative prices if he wishes.

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Question 13

Charlie's utility function is x_Ax_B.The price of apples used to be $1 per unit and the price of bananas was $2 per unit.His income was $40 per day.If the price of apples increased to $1.50 and the price of bananas fell to $1.75, then in order to be able to just afford his old bundle, Charlie would have to have a daily income of

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Question 14

The following can be said about the income and substitution effects of a price increase on the demand for a good whose price rose:

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Question 15

Use a diagram to prove that in case there are two goods, the substitution effect of an increase in the price of good x reduces the demand for good x.

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Question 16

Charlie consumes apples and bananas.His utility function is U(X_A, X_B)=x_Ax²_B.The price of apples is $1 the price of bananas is $2, and his income is $30 per week.If the price of bananas falls to $1

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Question 17

When the price of a good rises and income remains constant, there is a substitution effect on demand but there cannot be an income effect.

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Question 18

Walt considers x and y to be perfect substitutes.They originally cost $10 and $9 respectively.His income is $720.One day the price of x drops to $8.

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Question 19

Ben consumes two goods and his utility function is U(x₁, x₂)=x²₁x⁴₂.The price of good 2 does not change and his income does not change, but the price of good 1 decreases.

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Question 20

Showing 1 - 20 of 51

Exam 7: Slutsky Equation-Part A

The Slutsky substitution effect measures the movement between two points on the same indifference curve.

Waldo consumes only apples and bananas and bananas are an inferior good for him.The price of apples increases, but there is an increase in his income that keeps him on the same indifference curve as before.(Waldo has convex preferences, and he prefers more to less of either good.)

A consumer has the utility function U(x, y)= x + 2y1/2.The price of good x is 2 and the price of good y is 1.The consumer's income is 20.If the price of good y rises to 2, then entire change in demand for y is due to the substitution effect.

When the price of x rises, Marvin responds by changing his demand for x.The substitution effect is the part of this change that represents his change in demand

A Giffen good must be an inferior good.

What conditions ensure that the quantity of a good demanded increases as its price falls? Explain your answer, using diagrams.

The following can be said about the income and substitution effects of a price increase on the demand for a good whose price rose:

Use a diagram to prove that in case there are two goods, the substitution effect of an increase in the price of good x reduces the demand for good x.

Charlie consumes apples and bananas.His utility function is U(XA, XB)=xAx2B.The price of apples is $1 the price of bananas is $2, and his income is $30 per week.If the price of bananas falls to $1

When the price of a good rises and income remains constant, there is a substitution effect on demand but there cannot be an income effect.

Walt considers x and y to be perfect substitutes.They originally cost $10 and $9 respectively.His income is $720.One day the price of x drops to $8.

Ben consumes two goods and his utility function is U(x1, x2)=x21x42.The price of good 2 does not change and his income does not change, but the price of good 1 decreases.

Budget Constraint-Part A

Budget Constraint-Part B

Preferences-Part A

Preferences-Part B

Utility-Part A

Utility-Part B

Choice-Part A

Choice-Part B

Demand-Part A

Demand-Part B

Revealed Preference-Part A

Revealed Preference-Part B

Slutsky Equation-Part B

Buying and Selling-Part A

Buying and Selling-Part B

Intertemporal Choice-Part A

Intertemporal Choice-Part B

Asset Markets-Part A

Asset Markets-Part B

Uncertainty-Part A

Uncertainty-Part B

Risky Assets-Part A

Risky Assets-Part B

Consumers Surplus-Part A

Consumers Surplus-Part B

Market Demand-Part A

Market Demand-Part B

Equilibrium-Part A

Equilibrium-Part B

Auctions-Part A

Auctions-Part B

Technology-Part A

Technology-Part B

Profit Maximization-Part A

Profit Maximization-Part B

Cost Minimization-Part A

Cost Minimization-Part B

Cost Curves-Part A

Cost Curves-Part B

Firm Supply-Part A

Firm Supply-Part B

Industry Supply-Part A

Industry Supply-Part B

Monopoly-Part A

Monopoly-Part B

Monopoly Behavior-Part A

Monopoly Behavior-Part B

Factor Markets-Part A

Factor Markets-Part B

Oligopoly-Part A

Oligopoly-Part B

Game Theory-Part A

Game Theory-Part B

Game Applications-Part A

Game Applications-Part B

Behavioral Economics

Exchange-Part A

Exchange-Part B

Production-Part A

Production-Part B

Welfare-Part A

Welfare-Part B

Externalities-Part A

Externalities-Part B

Information Technology-Part A

Information Technology-Part B

Public Goods-Part A

A consumer has the utility function U(x, y)= x + 2y^1/2.The price of good x is 2 and the price of good y is 1.The consumer's income is 20.If the price of good y rises to 2, then entire change in demand for y is due to the substitution effect.

Charlie consumes apples and bananas.His utility function is U(X_A, X_B)=x_Ax²_B.The price of apples is $1 the price of bananas is $2, and his income is $30 per week.If the price of bananas falls to $1

Ben consumes two goods and his utility function is U(x₁, x₂)=x²₁x⁴₂.The price of good 2 does not change and his income does not change, but the price of good 1 decreases.