Solution-Derive and compare demand curve

Derive and compare demand curve

Reference no: EM1322

a) Johnny consumes peanuts (x1) and a composite good (x2). His utility function is U = x1x2. His marginal utilities are MU1 = x2 and MU2 = x1. Johnny's budget is $20 and the price of the composite good is $1. Derive Johnny's demand function for peanuts.

b) Ambrose consumes peanuts (x1) and a composite good (x2).He has a utility functionU = 4 x1 + x2. This means his MU1 = 2/√x1 and his MU2 = 1 . The price of the composite good is p2 = 1. His budget is $20 per month. Derive Ambrose's demand function for peanuts. How does it compare with Johnny's demand curve for peanuts?

Reference no: EM1322

Questions Cloud

Fixed cost and vairiable cost : Questions: : Which of the following are likely to be fixed costs and which variable costs for a chocolate factory over the course of a month? Explain your choice.

Laffer curve : tax rate and tax revenue : Question based on Laffer Curve : Tax Rate and Tax Revenue, Do raising tax rates necessarily raise tax revenue? What factors affect how tax revenue changes when tax rates change?

Case study analysis about optimum resource allocation : Case study analysis about optimum resource allocation: - Why might you suspect (even without evidence) that the economy might not be able to produce all the schools and clinics the Ministers want? What constraints are there on an economy's productio..

Problem based on utility function : Problem based on Utility Function - Problem, Answer and explain the following using a diagram which is completely labeled.

Derive and compare demand curve : Question based on Derive and compare demand curve, Derive Ambrose's demand function for peanuts. How does it compare with Johnny's demand curve for peanuts?

Long-term federal government budget problems : Question:. Explain why there are long-term Federal government budget problems. Explain why the base-line forecast of the CBO is misleading.

Describe the present economic crisis situation in europe : Describe the present economic crisis situation in Europe. Why has it been so difficult for the Europeans to find a solution to this problem? Comment on what implications the crisis may have for the rest of the world if Europeans are not able to ag..

In using the taylor rule : In using the Taylor Rule as a guideline for monetary policy, what are the pros and cons of using forecasted values of inflation and output rather than observed values of these variables?

Inflation targeting be a good policy : Why might it be difficult for the Fed to formally adopt inflation targeting? Would inflation targeting be a good policy for the Fed in the present economic environment

User Account

All Pages

Derive and compare demand curve

Reference no: EM1322

Reference no: EM1322

Questions Cloud

Reviews

Write a Review

Macroeconomics Questions & Answers

Long-term federal government budget problems

Inflation targeting be a good policy

Describe the present economic crisis situation in europe

In using the taylor rule

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT