Calculate the new optimal bundle

Assignment Help Business Economics

Reference no: EM131004859

Suppose prices were p1 = p2 = 1 and income was 10. In the next year the price of good 1 doubled. The price of good 2 stayed the same. Calculate the CPI income adjustment. Calculate the new optimal bundle. And lastly, calculate the amount of the substitution bias. By how much is the consumer better off as a result of CPI adjustment relative to his utility before the price change? (Please show the diagram as well.)

Reference no: EM131004859

Questions Cloud

Consider the discrete bertrand game described : Consider the discrete Bertrand game described in the Oligopoly lecture notes/video. According to the rules of this game each student selects a number from the set {0,1,2, 3, 4, 5, 6, 7, 8, 9, 10} and is randomly matched with another student. Whoever ..

Measure of goodness-of-fit of estimated regression equation : The F-statistic is an alternative measure of goodness-of-fit of an estimated regression equation and defined as the: a)variation not explained b)variation explained c) variation not explained by the regression equattion relative to the variation expl..

Competitive market without government interventions : Suppose that in a competitive market without government interventions, the market equilibrium is Q* and P*. Graphically show the consumer surplus, the producer surplus and the social surplus under the following government interventions. The governmen..

The court denies recovery-on what basis : Joseph, who owns the only pizza parlor in Middletown, learns that Giovanni is about to open a competing pizza parlor in the same small town, just a few blocks from Joseph's restaurant. Joseph offers Giovanni $10,000 in return for Giovanni's promise n..

Calculate the new optimal bundle : Suppose prices were p1 = p2 = 1 and income was 10. In the next year the price of good 1 doubled. The price of good 2 stayed the same. Calculate the CPI income adjustment. Calculate the new optimal bundle. And lastly, calculate the amount of the subst..

Determine the optimal two part pricing strategy : You are the manager of a monopoly. The consumer’s inverse demand function for your firm’s product is P = 100 –20Q, and your cost function is C (Q) = $20Q. Part a Determine the optimal two part pricing strategy. Part b How much additional profit do yo..

Invoke the assumption of perfect competition : Assume a (perfectly competitive) firm has production technology given by f(L, K) = √ L + √ K. Assume pK = 1 = pL and compute its (long-run) supply schedule. Where in the analysis do you invoke the assumption of perfect competition?

Determine which swimming pool design has lower present cost : The City of Brandon is installing a new swimming pool in the municipal recreation centre. Two designs are under consideration, both of which are to be permanent (i.e., lasting forever). The first design is for a reinforced concrete pool that has a fi..

Using straight-line depreciation with scrap value : Using a streadsheet program, chart the book value of a $14 000 asset over a sevenyear life using declining-balance depreciation (d=0.2). On the same chart, show the book value of the $14 000 asset using straight-line depreciation with scrap value of ..

User Account

All Pages