Ross derives utility from only two goods, chocolates (x) and donuts (y). His utility function is as follows: U(x,y) = 2xy. His marginal utility from chocolates (x) and donuts (y) are given as follows: MUx = 2y and MUy = 2x. Ross has an income of $100 and the price of chocolates (Px) and donuts (Py) are both $0.50. b. Suppose the price of donuts (Py) increases to $0.80, the price of chocolates and income remain unchanged. How much is the total effect of this price change on Ross's consumption of donuts? Show your work. How much of this total effect is due to the income effect and how much is due to the substitution effect? Show your work.
Ross derives utility from only two goods, chocolates (x) and donuts (y). His utility function is as follows: U(x,y) = 2xy. His marginal utility from chocolates (x) and donuts (y) are given as follows: MUx = 2y and MUy = 2x. Ross has an income of $100 and the price of chocolates (Px) and donuts (Py) are both $0.50. b. Suppose the price of donuts (Py) increases to $0.80, the price of chocolates and income remain unchanged. How much is the total effect of this price change on Ross's consumption of donuts? Show your work. How much of this total effect is due to the income effect and how much is due to the substitution effect? Show your work.
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Related questions
Given the following information: PX =$8, PY = $6; Consumer's Budget (B) = $76
Units of X |
TUX |
MUX |
Units of Y |
TUY |
MUY |
1 |
48 |
54 |
|||
2 |
40 |
102 |
|||
3 |
32 |
144 |
|||
4 |
24 |
174 |
|||
5 |
16 |
192 |
|||
6 |
8 |
204 |
|||
7 |
0 |
210 |
What combination of X and Y should the consumer buy?
What is the combined total utility from that combination of X and Y (TUX+Y)
How much the consumer spent on X and Y
Michael spends all of his income on coffee and donuts. A coffee costs $2.50 and a donut costs $2.00. At his current consumption level, the marginal utility for coffee is 30 utils, and the marginal utility for a donut is 60 utils. Which statement best describes what Michael needs to do to maximize his utility?
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Question 2
What is it called when the marginal utility derived from the last dollar spent on each good is the same across all goods and the last dollar spent uses all of the available budget for the purchase of those goods?
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Question 3 (1 point)
What does the economic theory of marginal utility infer?
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Question 4
Kate is addicted to chocolate and does not care how much it costs. In fact, she spends more than $20 a week on chocolate. What can be concluded about elasticity in her buying decisions?
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Question 5 (1 point)
Why does the demand for a good become relatively more elastic?
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Question 6 (1 point)
Assume the price of chicken per pound is $3.49 and that Americans purchase 10 million pounds per chicken every month. If the price of chicken increases to $5.49 per pound, identify what will occur to consumer surplus?
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Question 7 (1 point)
What is another name for the difference between the price that consumers are willing to pay for a good and a lower price that they may actually have to pay?
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Question 8
Adam, Brian, Robert, and Sam all want to attend a football game. The admission price is $48. Adam is willing to pay $59 for the ticket. Brian is willing to pay $39. Robert is willing to pay $45, and Sam is willing to pay $55. Based on this information, who will go to the game?
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Question 9 (1 point)
Lily is willing to pay $10 for one bracelet and $5 for a second. Patty is willing to pay $12 for one bracelet and $2 for a second. If the price is currently $8 per bracelet, identify what is the total consumer surplus after Lily and Patty make their purchases?
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Question 10 (1 point)
Manfred is willing to shovel one driveway for $25, a second for $30, and a third for $35. Assume that the market rate for shoveling driveways is $32. How many driveways will Manfred shovel, what will be his total revenue, and what will be his producer surplus?
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Question 11 (1 point)
What would the difference between the price that producers receive and the lower price at which they are willing to sell the good be called?
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Question 12 (1 point)
What will happen when there is an increase in the price of eBook downloads?
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Question 13 (1 point)
When is price elasticity of demand utilized to measure how an individual changes the quantity they demand?
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Question 14 (1 point)
Assume Mary consumes only tea and pastries. A cup of tea costs 5 euros and a pastry costs 8 euros. Her weekly income is 450 euros. Mary always drinks 2 cups of tea for every pastry she consumes. What is Maryâs optimal weekly consumption bundle?
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Question 15 (1 point)
When is producer surplus a positive value?
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