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John has a weekly endowment of 140 dollars that he spends on buying games (G) and music cds (M). The price of each game is 30 dollars, the price of each cd is 20 dollars. He can buy any amount of the two goods that satisfies the budget constraint, including fractions (for example G=0.3987 and M=0.8765 is allowed as long as it is feasible). John's utility is given by: U(G,M)=G1/2+M1/2
a) Find John's Budget constraint.
b) Set up the Lagrangian and find his optimal consumption.
c) What is his new consumption if the price of games becomes 20 dollars?
An individual makes five annual deposits of $2,000 in a savings account that pays interest at a rate of 4% per year. One year after making the last deposit, the interest rate changes to 6% per year
Submit at least one coordinate point that can be used to graph the line 1A - 1B = 3. Remember that the left hand side must equal the right hand side when you plug your numbers in. Your submission must be unique from.
b. If the government establishes a price floor of $9, explain what will result in terms of excess demand or supply. c. If the government establishes a price ceiling of $6, explain what will result in terms of excess demand or supply.
Customer Group B is willing to pay $29,000 for the SUV and $1,000 for the towing package. Assuming the manufacturer cannot price discriminate but can bundle the products or sell them separate, which of the options below maximizes its revenues
profit contribution analysis. Kathy's Bakery is a full -service bakery in Omaha, Nebraska. Kathy sells loaves of wheat bread for $3 a loaf. Of this amount, $1.50 is profit contribution. She is considering an attempt to differentiate her shop
An auto dealership estimates that its demand curve has an elasticity of 2.78. If it wishes to increase sales by 12%, by how much should it decrease price What will happen to revenue (rise or fall) If instead it raises price by 20%, what is the per..
A monopoly with constant marginal costs MC = 6 has two potential groups of customers, whose demands are Q1 = 24-p and Q2 = 24-2p respectively. If the monopoly can charge them the same two-part tariff, what is the optimal unit price p and fixed fee ..
During spring break, students have an elasticity of demand for a trip to Florida of -3. How much should an airline charge students for a ticket if the price it charges the general public is $360 Assume the general public has an elasticity of -2.
Suppose instead that the goverment wished to raise GDP to 7,100, but it was unwilling to run a surplus or deficit. Therefore the change in government purchases would have to be matched by and equal change in taxes. What change in government purcha..
The fisherman has a fixed cost of $200 per day and variable costs of $150 per hour (wages and fuel). Fill in the information missing in the following table. Hours/ day Total Fixed Costs Total Variable Costs Total Costs Marginal Costs
Assume that an investor is risk-neutral (i.e. assume that the investor always chooses the investment with the higher expected rate of return even if it is riskier). If the yield on 1-year marketable CD's is 6% while the yield on 2-year marketable ..
What are the highest and lowest payments from the writer that the beekeeper-farmer team will accept for the sixth day Assuming that the farmer can dispose of the $7 from the writer as she wishes, what range of payments will the beekeeper accept
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