The equation of a utility function - Carol is always willing

The equation of a utility function - Carol is always willing

Question

Write down the equation of a utility function and draw an indifference curve that corresponds to
eachof the following cases> https://solutionlly.com/downloads/the-equation-of-a-utility-function-
carol-is-always-willing
The equation of a utility function - Carol is always willing

Question

Write down the equation of a utility function and draw an indifference curve that corresponds to
eachof the following cases.

(a) Carol is always willing to give up 2 pizzas in exchange for 1 additional beer no matter how
manypizzas and beers she has in her consumption bundle.

(b) Bob always consumes beer and pizza in fixed proportions. Specifically, if Bob has 1 pizza,
heconsumes precisely 2 beers and additional beers represent no additional utility for Bob.
Similarly, ifBob has 2 beers, he consumes precisely 1 pizza and additional pizzas represent no
additional utilityfor Bob. In addition, when Bob has 4 pizzas and 10 beers, his utility is 32.

(c) Kathy loves pizza and is neutral toward beer (i.e., she neither likes nor dislikes beer). She
derives4 units of satisfaction from each pizza she consumes.

2. Suppose the indifference curves of a consumer are given by x2(x1) = c ? 5x1. Give an
example of autility function that represents the underlying preferences.3. Suppose the utility
function is given by U(x1, x2) =x21x52 54. Calculate the demand function, that is,calculate the
optimal consumption bundle as a function of m, p1, and p2.4. Suppose the utility function is
given by U(x1, x2) = 14 min{2x, 3y}.

Calculate the demand function,that is, calculate the optimal consumption bundle as a function of
m, p1, and p2.5. Jeremy’s favorite flowers are tulips x1 and daffodils x2. Suppose p1 = 2, p2 = 4
and m = 40.

(a) Write down Jeremy’s budget constraint (a formula) and plot all Jeremy’s affordable bundles
in the graph (his budget set). Find the slope of the budget line (number). Give an economic
interpretation for the slope of the budget line (one sentence).

(b) Jeremy’s utility function is given by U(x1, x2) = p(ln x1 + ln x2)2 + 7. Propose a simpler
utilityfunction that represents the same preferences (give a formula). Explain why your utility

1/2
 representsthe same preferences (one sentence).

(c) Plot Jeremy’s indifference curve map (graph), find the MRS analytically (give a formula) and
find itsvalue at bundle (2, 4) (one number). Give an economic interpretation of this number (one
sentence).Mark its value in the graph.

(d) Find the optimal bundle (x1, x2) (two numbers). Is your solution interior?(e) Find the optimal
bundle given p1 = 2, p2 = 4 and m = 40 assuming U(x1, x2) = 2x1 + 3x2. Is yoursolution
interior?6. Suppose prices are given by p1 = 2 and p2 = 4. Which of the following consumption
patterns areconsistent with the assumption that the consumer chooses the consumption bundle
that he prefers themost among those affordable if his preferences are monotone (“more-is-
better”) and strictly convex (thestrict version of “averages-are-better-than-extremes”?

(a) If m = 10, he consumes (2, 1). If m = 14, he consumes (3, 2).(b) If m = 12, he consumes (2,
2). If m = 18, he consumes (2, 4).(c) If m = 12, he consumes (2, 2). If m = 18, he consumes (1,
4).(d) If m = 12, he consumes (2, 2). If m = 18, he consumes (1, 1).(e) If m = 10, he consumes
(1, 2). If m = 16, he consumes (2, 3).(f) If m = 10, he consumes (1, 2). If m = 12, he consumes
(0, 3)

The equation of a utility function - Carol is always willing

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