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Suppose that the consumer’s utility function is given by 1/ 2 1/ 4 U 10X Y . If price of good X and Y are 4 and 2
respectively and income constraint is Birr 100.
a. The demand equation for X and Y.
b. The utility maximizing levels of X and Y.
c. The maximum utility.
d. Compute both X ,Y Y ,X MRS and MRS . Is there any difference between the two?
1. Jose spends her income $40 on two goods. Good X and Good Y. The price of good X is $8 and price of good Y is $2.
(a) Draw the budget constraint to show how Jose can spend his money on the two goods.
(b) Calculate the slope of the budget line.
(c) If the price of good X increase by $2 what will happen to the budget line?
(d) If the price of good Y decreases by $1 what will happen to the budget line?
1. The demand function for plantains is Qd =100 – 6P while the supply for plantains is
Qs = 28 + 3P where Qd is the quantity demanded, Qs is the quantity supplied and P is the price of plantains.
(a) Calculate the equilibrium price and quantity for plantains.
(b) Plot the data on a graph
(c) On the same graph increase the supply of plantains,.
(d) State what is the impact on equilibrium price and quantity?
Write down the matrix of the quadratic form
Q(x1,x2,x3,x4) = x12 +2x2 −7x32 +x42 −4x1x2 +8x1x3 −6x3x4
In 2021, a major ice storm hit the northern areas. The storm brought down power lines and trees, cutting electricity in many areas, making travel difficult, and slowing down repair crews. Heating homes became a major challenge. The storm created shortages of power generators. As a result, those products sold at prices much higher than normal. These high prices provoked cries of “price gouging” and calls on the government to impose price controls to prevent gouging. While no one likes to pay a higher price than normal for something, consider what would have happened with a price ceiling. The economic intuition is revealing.
Draw a diagram showing the market for generators with an equilibrium price at Rs.25,000. Now impose a price ceiling at Rs.20,000 per generator. What would be the impact of the price ceiling on the quantity demanded? On the quantity supplied? Who would benefit from the price ceiling and who would be harmed?
Q.1 Suppose you manage a local grocery store and you learn that Imtiaz super Market is about to open a store near you.
Use the model of monopolistic competition to analyze the impact of this new store on the quantity of output your store should produce (Q) and the price your store should charge (P). Note, we are assuming you each sell one representative good.
Explain how the opening of this new store may affect your business. Be sure to address what can happen to your customers, supply and demand, and prices. What will happen to your profits? Show graphically and explain your reasoning in detail.
Explain at least one strategy that could be used to defend your market share against the new store (e.g., address what you are going to do to keep your customers).
John`s income drops from 100.000 € to 90.000 €, so now he takes 3 holiday instead of What is his YED fo holidays?
Suppose you manage a local grocery store and you learn that Imtiaz super Market is about to open a store near you.
Use the model of monopolistic competition to analyze the impact of this new store on the quantity of output your store should produce (Q) and the price your store should charge (P). Note, we are assuming you each sell one representative good.
Explain how the opening of this new store may affect your business. Be sure to address what can happen to your customers, supply and demand, and prices. What will happen to your profits? Show graphically and explain your reasoning in detail.
Explain at least one strategy that could be used to defend your market share against the new store (e.g., address what you are going to do to keep your customers).
a seller of boiled eggs faces a market price,P=ksh15 average total cost of ptoduction,ATC=10 and output,q=150,what is its profit level?
Assume that beer is a normal good. If the price of beer rises, then the substitution effect
results in the person buying ________ of the good and the income effect results in the
person buying ________ of the good.
A. more, more
B. more, less
C. less, more
D. less, less
6. Which of the following is true regarding income along a price-consumption curve?
A. Income is increasing.
B. Income is decreasing.
C. Income is constant.
D. The level of income depends on the level of utility.
7. Joe’s coffee house produces coffee drinks under the production function q = 5KL where q
is the number of cups generated per hour, K is the number of coffee machines (capital), and
L is the number of employees hired per hour (labor). What is the average product of
labor(APL)?
A. APL = 5
B. APL = 5K
C. APL = 5L
D. APL = 5K/L
