1. If a consumer has a utility function u (x1, x2)spend on good 2?= x1x, what fraction of her income will2. For what kind of preferences (or utility) will the consumer be just as well-off facing aquantity tax as an income tax that raises the same money for the government?3. When prices are (P1, P2) = (1,2) a consumer demands (x1, x2) = (1,2), and when prices are(P1, P2) (2,1) the consumer demands (x1, x2) = (2,1). Is this behavior consistent with=the model of utility maximization?4. When prices are (P1, P2) = (2,1) a consumer demands (x1, x2) = (1,2), and when prices are=(P1, P2) (1,2) the consumer demands (x1, x2) = (2,1). Is this behavior consistent withthe model of utility maximization?

The first question is asking about the fraction of income a consumer will spend on good 2 given a…

Answered: 1. If a consumer has a utility function…

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter6: Consumer Choice And Demand

Section: Chapter Questions

Problem 15PAE

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a. Assume that the elasticity of demand for Fanta is -0.5 while the elasticity of supply is 0.7. Assuming further that a tax of K10 is applied on each bottle of Fanta sold, how much of this will be borne by producers. b. Assume that the price of good X is K10 while that of good Y is K20. A consumer has allocated consumption between the two goods in such a way that the marginal utility of X is 15 utils and that of Y is 25 utils. Is this an optimal consumption bundle? If not, what should the consumer do to reach the optimum?
2. Consider a society with only two people one rich and one poor-who have the same util- ity functions. These utility functions exhibit diminishing marginal utility. Suppose that taxes are set such that the total amount of utility that each person loses is the same. Does it follow that the tax will be progressive? Explain.
5. If a consumer has a utility function u(x1, x2) = x1x42, what fraction ofher income will she spend on good 2?6. For what kind of preferences will the consumer be just as well-off facinga quantity tax as an income tax?
6. If the demand equation is L=100-10r find the consumer's surplus when the consumer purchases 8 units.
1-Using the following budget constraint: 600 1X + 2Y, Utility U = √XY A. How many Xs and Ys do you buy, how do you divide your budget, and what is the level of utility achieved? = B. The government grants a Subsidy (the opposite of a tax) of $1 on Y. C. What are the new quantities of X and Y purchased? D. What is the total amount the government spends on the Subsidy? E. What is the level of Utility achieved? F. If the same amount of Subsidy is added to income would you achieve a higher utility level? Calculate, Graph and Explain using the logic of the Lump-Sum Principle we saw in class
5. Consider an economy with two goods, A and B. Suppose the price of good A is p and let the price of good B be 1. There is a large number of identical consumers. The indifference curves of consumers have the usual shape with diminishing marginal rate of substitution between the two goods. Suppose the government must raise a tax revenue of R, and can do this either by imposing a per-unit tax of t on good A, or by imposing a lump-sum tax T on each consumer. Which policy would the consumers prefer? Explain your reasoning carefully, using any appropriate diagram, and explain the intuition behind your result.
Suppose Jolene buys apples weekly. If the price of apples were to drop, Jolene would experience in . a decrease an increase a decrease an increase a decrease total revenue consumer surplus her budget constraint marginal utility willingness to pay Suppose the government levies a tax of $0.50 per pack on the buyers of cigarettes. Suppose also that the price elastic- ity of demand for cigarettes is 1.2 and the price elasticity of supply is 0.7. Because this tax is levied on the sale of a speciﬁ c good, it is an excise tax. a progressive tax. a regressive tax. a proportional tax. a lump-sum tax. After this tax is levied, total surplus will , and the price received by producers (not including the tax) will . increase decrease increase decrease increase increase by exactly $0.50 fall by exactly $0.50 fall by less than $0.50 fall by less than $0.50 increase by more than $0.50 If economists were to study the tax incidence in this cigarette market, they would…
19. If people consume less of a good when their income increases, it is call a) a subsidy b) a compliment c) a normal good d) an inferrior good
5. A consumer has preferences over vegetables and meat given by the utility function U(V, M) of vegetables is $2 and the price of each serving of meat is $1. The government wants to encourage vegetable consumption so it puts a tax of $1 on each unit of meat purchased. If the consumer maximizes their utility, how much will the tax reduce their meat consumption? VAM2/3. They currently have $30 to spend, the price of each serving %3D
only typed answer A consumer has inverse demand of p=15−1q for a good and the market price is $4.00. Calculate consumer surplus and the total value of the good for the corresponding quantity consumed. Consumer surplus is $enter your response here. (Enter your response rounded to two decimal places.) The consumer's expenditure for the good is $enter your response here. (Enter your response rounded to two decimal places.)
27. If the demand for a pack of cigarettes is Q=50-$5P For a typical smoker and the price per pack is $8, how many packs of cigarettes does the person buy? What is his/her consumer surplus?
Consider a economy with three goods, a, b and c. The total supply consists 150a, 180b and 120c. There are three consumers 1,2,3 They have the followiing preferences: u1(a,b,c)=a u2(a,b,c)=a+b u3(a,b,c)=1+c a) Identify a competitive equilibrium from euqal incomes in which the price of a and c are equal. b) Find the egalitarian equivalent allocation(EEA is one that gives each agent the same utility as giving the one a fraction x of total supply, for x as large as possible)

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