Maya is doing her undergrad at Queen's University. She loves donuts and chocolate chip cookies (CCC). Her utility function is given by u(x, y) = √8x + 5 + 2y, where x denotes her consumption of donuts and y denotes her consumption of CCC. Her budget is $10/day. The price of a donut is $1.
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(c) When the
(d) According to your calculation in part (c), is CCC a normal good or an inferior good? Explain. Is CCC an ordinary good or a Giffen good? Explain.
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- Jackie has a budget of $36 per month to spend on snacks. She can spend this budget on bags of potato chips (C) and Hershey chocolate bars (H). Potato chips cost $4 per bag, while Hershey bars cost $1 per bar. The utility that Jackie receives from consuming potato chips and Hershey bars is represented by the following utility function: U=3C2 H. Given that Jackie seeks to maximize her utility, find the number of potato chip bags and Hershey chocolate bars that Jackie will purchase each month.Maya is doing her undergrad at Queen's University. She loves donuts and chocolate chip cookies (CCC). Her utility function is given by u(x, y) = √8x +5 + 2y, where x denotes her consumption of donuts and y denotes her consumption of CCC. Her budget is $10/day. The price of a donut is $1. (a) When the price of CCC is $1, what is Maya's optimal choice of donuts and CCC? (b) When the price of CCC is $8, what is Maya's optimal choice of donuts and CCC? (c) When the price of CCC increases from $1 to $8, calculate Maya's substitution effect and income effect. (d) According to your calculation in part (c), is CCC a normal good or an inferior good? Explain. Is CCC an ordinary good or a Giffen good? Explain.Aisha is considering how to allocate the next 6 hours of her free time. She could choose between leisure (L) and helping her neighbour with the house chores. If she decides to help her neighbour, she is going to get paid at £25 per hour, which she can then spend on her favourite pizza (P). Suppose the price of pizza is £12.50. Aisha's preferences for leisure and pizza are given by the following utility function: U(L, P) = 3L + P. (MUL = 3, MUp = 1). a) Write down Aisha's budget equation and draw the corresponding budget line. Clearly label the axes and calculate the coordinates of the points of intersection of the budget line with each axis. b) Calculate Aisha's marginal rate of substitution between leisure and pizza. Explain the concept of MRS and interpret the figure obtained. c) Find Aisha's optimal consumption bundle, both algebraically and graphically. Explain your reasoning. d) Would Aisha's optimal choice change if she could get a discount on her pizza purchases so that each…
- Aisha is considering how to allocate the next 6 hours of her free time. She could choose between leisure (L) and helping her neighbour with the house chores. If she decides to help her neighbour, she is going to get paid at £25 per hour, which she can then spend on her favourite pizza (P). Suppose the price of pizza is £12.50. Aisha's preferences for leisure and pizza are given by the following utility function: U (L, P) = 3L + P. (MUL = 3, MUp = 1). a) Write down Aisha's budget equation and draw the corresponding budget line. Clearly label the axes and calculate the coordinates of the points of intersection of the budget line with each axis. d) Would Aisha's optimal choice change if she could get a discount on her pizza purchases so that each pizza would cost £5? Explain. e) Would Aisha's optimal choice change (as compared to c), if she could get a discount on her pizza purchases so that each additional pizza beyond the first two, cost £5? (In other words, the first two pizzas need to…Pele enjoys coffee (C) and tea (T) according to the function U(C, T) = 6C + 8T (a) What does her utility function say about her MRS of coffee and tea? (b) Suppose the price of coffee (PC) and the price of tea (PT) are both $3. If Alana has $12 to spend on these products, i. How much coffee and tea should she buy to maximize her utility? ii. Draw a carefully labeled graph of her indifference curve map and her budget constraint. Put the quantities of coffee on the horizontal axis. Be sure to identify the utility maximizing point. (c) Would Alana buy more coffee if she had more income? Explain. (d) Suppose the price of coffee fell to $2. How would her consumption change?Kate’s utility function includes coffee (c) and sugar (s). She only consumes coffee and sugar together, and she only consumes in the ratio of one unit (cup) of coffee with two units (spoons) of sugar. Her utility function is What is her marginal utility of sugar if she has 4 cups of coffee and 6 spoons of sugar? Remember that unit are infinitely divisible (you can have parts of units). (a) 0 (b) 1 (c) ½ (d) 2