Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

QUESTION 1 20 points Save Answer Peter has an endowment of 30 units of good x and 50 units of good y. He can buy

image text in transcribedimage text in transcribed
image text in transcribedimage text in transcribed
QUESTION 1 20 points Save Answer Peter has an endowment of 30 units of good x and 50 units of good y. He can buy and sell x at a price of $20 and y at a price of $10. a) (3pts) Write the equation for Peter's budget constraint. b) (3pts) What is the most amount of good x he could consume? c) (4pts) If Peter chooses to consume the bundle (40, 30), what are his net demands for the two goods? d) (10pts) Peter's preference is represented by the utility function u(x, y) = xy. Determine Peter's optimal consumption bundle. Which good does Peter sell and which good does he buy? Attach File Browse Local Files Browse Content Collection 20 points Sa QUESTION 2 Save Save All Answers to save all answers. Save All AnswersAttach File Browse Local Files 2068_1&course_id=_173079_1&conten... of 4 x Browse Content Collection QUESTION 2 Samantha Smoothie's utility function is u(c1, C2) where c1 is her consumption in period 1 and c2 is her consumption in period 2. She earns $200 in period 1 and $220 in period 2. Samantha can borrow and lend at an interest rate of 10% and there is no inflation. a. (5pts) Write down an intertemporal budget equation for Samantha. b. (5pts) Draw the graph of the budget constraint. Label the magnitudes of vertical and horizontal intercepts and the slope of the budget line. c. (5pts) Suppose Samantha's utility function is u(c1, c2) = 3c1 + 4c2. What is her optimal bundle or gross demand (c1, c2)? Is she a saver or a borrower in period 1? d. (5pts) Now if Samantha's utility function is u( c1, c2) = min(c1, c2}. What would be her gross demand (c1, c2) now? Is she a saver or a borrower in period 1? Attach File Browse Local Files Browse Content Collection Click Save and Submit to save and submit. Click Save All Answers to save all answers. Save All Answers Sa MacBook Pro Leave Share Screen & O $ % 6 7 8 9 @ W# 4 5 0 U R m W H I C D N M <

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

E Marketing

Authors: Raymond Frost

7th Edition INTERNATIONAL EDITION

0132953443, 978-0132953443

More Books

Students also viewed these Economics questions

Question

Where is the position?

Answered: 1 week ago

Question

2. It is the results achieved that are important.

Answered: 1 week ago

Question

7. One or other combination of 16.

Answered: 1 week ago