ARE 2150 Lecture Notes - Lecture 11: High Tech, Sport Utility Vehicle, Marginal Cost

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cerisecrow681

29 Jan 2020

School

UConn

Department

Agricultural and Resource Economics

Course

ARE 2150

Professor

Emma Bojinova

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Document Summary

Cont the line rotates inward from l1 to l3. The maximizing market basket must satisfy two conditions: it must be located on the budget line, it must give the consumer the most preferred combination of goods and services. Satisfaction is maximized (given the budget constraint) at the point where. Marginal benefit: benefit from the consumption of one additional unit of a good. Marginal cost: cost of one additional unit of a good. So, we can then say that satisfaction is maximized when the marginal benefit the benefit associated with the consumption of one additional unit of food is equal to the marginal cost the cost of the additional unit of food. The marginal benefit is measured by the mrs. Corner solutions: situation in which the marginal rate of substitution for one good in a chosen market basket is not equal to the slope of the budget line.

Related Questions

This question explores the quasi-linear utility function. Consider Thomas who has preferences over food, QF, and clothing, QC. His preferences are represented by

U (QF,QC) = [alpha]QF^(1/3) + QC

where [alpha] > 0. Let pF, pC, and I represent the prices of food, clothing, and Thomas's budget for food and clothing.

i. Using the Lagrangian method, solve mathematically for the demand function for each good. Make sure to show each step of your work.

ii. Determine whether food and clothing are normal or inferior goods for Thomas. Prove your answer mathematically.

iii. Are food and clothing substitutes or complements for Thomas? Prove your answer mathematically.

iv. Now assume that [alpha] = 3, and I = $1,224.

1. If pf = $3, and pc = $12 what is Thomas's demand for food and clothing?

2. If the price of food goes down to pf = $4/3, what happens to Thomas's demand for food and clothing?

3. If Thomasâ income falls to $996, what happens to quantity consumed of each good?

4. Graph Thomas's inverse demand curve (i.e price on y-axis, quantity on x-axis) for food when his income is I = $996 and the price of clothing is pc = $12. Be as precise as possible, labeling the exact value of any important points on the graph.

mauvefox570

Chapter 1 talks about why you should care about consumer behavior. I would like to hear from you. Tell me in a couple of paragraphs why consumer behavior is important

1-1 Consumption and Consumer Behavior

1-2 The Ways in Which Consumers Are Treated

1-3 The CB Fieldâs Role in Business, Society, and for Consumers

1-4 Different Approaches to Studying Consumer Behavior

1-5 Consumer Behavior Is Dynamic

1.The Phillie Phanatic always eats his ballpark frank in a special way; he uses a foot-long hot dog together with precisely half a bun, 1 ounce of mustard, and 2 ounces of pickle relish. He only gains utility/satisfaction from these 4 items, any extra of a single item without the others is worthless.

What can we say about the relationship among these goods for the Phillie Phanatic and the shape of his indifference curve with respect to these goods?

2. Consider a person with convex indifference curves. When she optimally chooses a consumption bundle of a particular amount of fruit on the Y-axis, and vegetables on the X-axis, her marginal rate of substitution equals:

A. 1

B. PV_/PF (The price of vegetables divided by the price of fruit)

C. P_F/P_V (The price of fruit divided by the price of vegetables)

D. 0

3. A consumer has a budget for food (F) and shelter (S). With income M, and prices PF and PS, the budget constraint for this consumer may be represented as:

A. PSS + PFF = M

B. F = M/PF - (PS/PF)S

C. S = M/PS - (PF/PS)F

D. All of the above

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ARE 2150 Lecture Notes - Lecture 11: High Tech, Sport Utility Vehicle, Marginal Cost

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