A ______ reflects the combinations of two goods X and Y in the economy, that the consumer can purchase at prices Px and Py with the given income M.

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Define and Analyze the Problems of Scarcity and Choices

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Paramjeet ChawlaLv8

29 Oct 2020

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Suppose that a consumer's preferences over two goods, x and y, are represented by a Cobb-Douglas utility function:

U(x,y) = x^1-i²yi^²

a. Find the expenditure function of the consumer, and the compensated demand functions.

b. Suppose that i² = 1/4 and that initially a consumer is in equilibrium with p_x = 1,p_y = 1, I = 100. What are the demands for xand y.

c. What is the minimum increase in income necessary for the consumer to be as well offunder price p_x = 1, p_y = 2, as she/he was at prices p_x = 1, p_y = 1?

Explain why the percentage increase is smaller than the increase inthe CPI for the consumer that you derived in part c.

byzantiumclam42

35. Ron starts out in consumer equilibrium, consuming two goods, X and Y. Ron's income rises. At this point, we can definitely conclude that A) MUX/PX > MUY/PY, and then Ron increases his consumption of X. B) MUX/PX > MUY/PY, and then Ron decreases his consumption of X. C) MUX/PX < MUY/PY, and then Ron increases his consumption of X. D) MUX/PX < MUY/PY, and then Ron decreases his consumption of X. E) none of the above.

Let u(x,y) = 5x + 5y and let I denote income and px, py the prices of the goods. compute the demand functions for goods x and y when I = 100 and px = py = 1

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A ______ reflects the combinations of two goods X and Y in the economy, that the consumer can purchase at prices Px and Py with the given income M.

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Principles of Economics

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