07 Jun Question 1. Suppose a consumer views two goods, X and Y, as perfect complements. Her utility function is given by U = MIN [X, 2Y]. Sketch the graph of the c
Question
1. Suppose a consumer views two goods, X and Y, as perfect complements. Her utility function is given by U = MIN [X, 2Y]. Sketch the graph of the consumers indifference curve that goes through the bundle X = 6 and Y = 5. Put the amount of Y on the vertical axis, and the amount of X on the horizontal axis. Which of the three assumptions that we made about consumer preferences is violated in this case?
2. Suppose a consumer has $600 to spend on two goods, Good X and Good Y. The price of Good X is given by PX = $20. The price of Good Y is given by PY = $15. Graph the consumer’s budget constraint. Please put the quantity of Good X on the horizontal axis, and the quantity of Good Y on the vertical axis. Be sure to label your graph carefully and accurately. What is the slope of the budget constraint?
3. Suppose a consumer’s preferences can be represented by the utility function U(X,Y) = X2Y. In the table below, identify 4 points on the consumer’s indifference curve where U = 10,000.
X
Y
4. Suppose a consumer’s preferences can be represented by the utility function U(X,Y) = Min (2X,Y). Also, suppose the consumer has $300 to spend and the price of Good X is PX = $3 and the price of Good Y is PY = $1. If the consumer maximizes their utility subject to their budget constraint, how much of Good X and how much of Good Y will the consumer purchase?
X* =
Y* =
5. Suppose a consumer’s preferences can be represented by the utility function U(X,Y) = X*Y. Also, suppose the consumer has $150 to spend and the price of Good X is PX = $2 and the price of Good Y is PY = $3. If the consumer maximizes their utility subject to their budget constraint, how much of Good X and how much of Good Y will the consumer purchase?
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