### Morning coffee with milk

Assignment Help Business Economics
##### Reference no: EM138210

Q. 1. Lee has the utility function U(x1, x2) = (x1+1)(x2+4) The price of x2 is \$1. Lee spends all his income to buy 6 units of x2 also no x1. Illustrate what is the minimum level of the price of x1 compatible with these facts? Explicate your answer.

2. Sheila budgets \$9 per week for her morning coffee with milk. She likes it only if it is prepared with 4 parts of coffee and 1 part milk. Coffee costs \$1 per ounce and milk costs \$0.5 per ounce. How much coffee and how much milk will Sheila buy per week? How would your answer change if the price of coffee rises to \$2 per week? Illustrate your answers graphically.

3. Max has the utility function U(x1,x2) = x1(x2+2)

(a) If the price of x1 is 2, the price of x2 is 1, and Max's income is 10, how much x1 will Max consume? How much x2?

(b) Suppose that Max's income level is 10. Derive Max's demand function for x1. Is x2 a substitute of x1 or a complement of it? (Be sure to show your calculations.)

#### Questions Cloud

 Monopolistic competition : Choose on which market structure that these businesses fit - monopolistic competition, perfect competition, and oligopoly also monopoly. Equilibrium level of income : Starting with the situation in part d, suppose the government starts taxing the population \$30 each year without spending anything. The average consumer income : The average consumer income is \$20,000, and the price of the related good is \$1.10. Compute the predicted quantity demanded of X at these prices and income. Expected utility maximization : Show that these choices are inconsistent with expected utility maximization. Morning coffee with milk : Sheila budgets \$9 per week for her morning coffee with milk. She likes it only if it is prepared with 4 parts of coffee and 1 part milk. What is the marginal revenue product : What is the marginal revenue product of hiring one low-skilled worker to clear woodland for one month. Two big questions of economics and the economic way : Use the two big questions of economics and the economic way of thinking to answer the following questions about the economic life of a homeless man. Relative profitability of the two potato chip segments : Discuss the manner in which an analyst would compare the relative profitability of the two potato chip segments. What should honda and toyota do to manage : What should Honda and Toyota do to manage this short term average price increase.

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