Microeconomics Answers

Consider the utility function of the form:
U(x_1,x_2 )=〖(α_1 x_1^ρ+α_2 x_2^ρ)〗^(1/ρ)
Where ρ ≤ 1. Show that the demand curve is:
x_1^M=((α_1⁄p_1 )^σ M)/((α_1^σ p_1^(1-σ)+α_2^σ p_2^(1-σ) ) )
If σ is 1/(1− ρ).

An agent with an endless lifespan owns exactly one unit of a good which she consumes during her life. The good is perfectly storable and the agent does not acquire any further holdings. Her consumption in period t is given by xt. The lifetime-utility function is given by:


u(x_0,x_1,x_2,…)=∑_(t=0)^∞▒〖β^t ln⁡(x_t ),〗 where by 0 <β< 1.

Calculate the agent’s optimal consumption for each period.

1.A consumer is deciding on the consumption of goods A and B. The subsistence levels of A and B are α and β. The term I is income, and pk {k=A,B} are the prices of A and B. Hence the consumer maximization problem is given by:
max γln(A − α) + (1− γ)ln(B − β)
s.t pAA + pBB = I

find the demand curve for goods A and B.

Consider a homeless guy desperate fir food? Can you think of threr ways of substitution that he may be willing to make? In each case please specify what he gives up and what he gets

A wholesaler of pencil charges 24/- per dozen on an order of fifty dozen or less. For order in excess of fifty dozen, the price is reduced by 20 paise per dozen. Find the size of the order in order to maximize revenue

Using the elasticity formulas.] Answer the following questions: a) The initial price for an item is $6.00, and the quantity demanded is 550 units. When the price is raised to $6.50, the quantity demanded falls to 520 units. What is the point elasticity of demand? How would we categorize this elasticity (elastic, inelastic, unit elastic,...)? b) A product’s point price elasticity has been estimated at -1.85 (different from part a). At the initial price of $30, the quantity demanded was 30 units. If the firm cuts the price to $27.25, how much will quantity demanded and sold increase? c) A firm’s demand curve is estimated to be Q = 450 - 2.5P, where Q is quantity and P is the price of the good. At P = $40, what is the point elasticity of demand?

1.Administrators are contemplating selling coffee at the George two days out of the week. It is estimated that weekly demand follows Q = 200−50P +30PC where Q is the number of cups of coffee sold each week, P is the price of the coffee, and PC is the price of coffee at the Starbucks down the street. a) How many cups will be sold if P = $1.50 and PC = $2? b) Write down the equation for the George’s demand demand curve for PC = $2. c) If Starbucks increases the price of their coffee to $3, what is the effect on the George’s demand curve? (hint: how far will it shift?) d) Dean Djerdjouri has asked ECON 326 to help estimate a demand curve for coffee being sold at the George. The first step in this analysis is to use economic theory and your intuition on what the most important factors we should take into account when estimating demand. Other than the variables already included, list two other factors that we should include in our analysis and explain the effect you would expect these factors to have on demand.

Does the fact that garbage men make more money than the average high school teacher mean that society values garbage removal more than education? If not, what does it mean ?

Consider a homeless guy desperate for food ? Can u think three ways of substitution that he may be willing to make ? In each case plz specify what he give up and what he gets ?

Suppose that as a result of the listeriosis outbreak, the department of health has warned against the consumption of Viennas. Explain using a properly labelled diagram, the effect of this in the market for Viennas, ceteris paribus