Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please solve it in 20 mins I will thumb you up please I need hand written solution please fast I will give you good comments

image text in transcribed

please solve it in 20 mins I will thumb you up please I need hand written solution please fast I will give you good comments also

Chloe sets aside a budget of 100 for spending on fashion accessories ( goodX) and cosmetics ( good Y ), the prices of which are PX=50 and PY=25, respectively. Chloe's preferences over the two goods are described by the utility function U(X,Y)= XY, for which MUX=Y and MUY=X. (a) Explain how Chloe's preferences can be translated into indifference curves. Sketch some of these in a diagram. Do her indifference curves touch the axes? [7 marks] (b) Find the number of fashion accessories and cosmetics that Chloe chooses to consume and illustrate her choice in your diagram. [8 marks] (c) Chloe invites her closest friends to celebrate her birthday and receives 8 fashion accessories as gifts, but no cosmetics. What is her utility gain from these gifts, assuming Chloe starts from the bundle in (b)? Add Chloe's new bundle and corresponding indifference curve in your diagram. [5 marks] (d) Analyse whether Chloe would be better off receiving a gift voucher equivalent in value to 8 fashion accessories, but which she can spend as she likes. Do you find this model a good description of the enjoyment from receiving birthday gifts? [10 marks]

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing SAP S 4HANA

Authors: Steve Biskie

1st Edition

1493222643, 978-1493222643

More Books

Students also viewed these Accounting questions

Question

What is the coupon rate

Answered: 1 week ago

Question

b. Where did they come from?

Answered: 1 week ago