price indifference curves

In the two good case, the level sets of the indirect utility fuction in the price space are sets of the form {(p1,p2) 'vertical line' v(p1,p2,y) = v0} for when v0 is an element in the set of real numbers These are sometimes called price-indifference curves. Sketch a possible map of price-indifference curves. Give separate ...continues

Price elasticity - the midpoint method

Studies indicate that the price elasticity of demand for cigarettes is about 0.4. If a pack of cigarettes currently costs $5 and the government wants to reduce smoking by 20%, by how much should it increase the price? What is the new price? Use the midpoint method in your calculations.

Production functions and cost

i. – Professor Smith and Professor Jones are going to produce a new introductory textbook. Production Function : q = (SJ)1/2 Q = number of pages in finished book S = number of working hours spent by Spent J = number of working hours spent by Jones Smith values labor at $20 per working hour, she spent 900 hours providing t ...continues

Risk Aversion

Please see the attached file for full problem description. --- Define Risk Aversion. Consider a risk-averse von Neumann-Morgenstern individual having wealth w who must decide whether to accept or decline a simple gamble offering a chance of winning or losing a small amount of wealth h with probabilities p and (1-p), respect ...continues

Risky Assets

Please see the attached file for full problem description. --- Suppose that there is one safe and one risky asset and that the investor has initial wealth . Investing in the risky asset yields the total (principal plus interest) of x(1+r), where r is a random variable with density f(r), r where < 0 < . The safe asset p ...continues

Slutsky Equation / utility max

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General Equilibrium

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Production functions and cost

Please see the attached file for full problem description. --- Each day Paul, who is in third grade, eats lunch at school. He likes only Twinkies (T) and Orange Slice (S), and these provide him a utility of Utility = U (T, S) = Every day his mother gives him $1 to spend on lunch. Assume that it is possible to purchase fr ...continues

Production functions and cost

Please see the attached file for full problem description. --- 4 The production of barstools (q) is characterized by a production function of the form a. Derive general expressions for average productivity of labor and capital for barstool production as functions of K and L. (Hint: By definition, = q/L and = q/K) ...continues

Economics/Microeconomics

Please see the attached file for full problem description. Solutions:1 a) If Twinkies cost $0.10 each and Slice costs $0.25 per cup, what is his budget constraint? Write down the budget equation and draw the budget line: Budget constraint $0.10T + $0.25S = $1 to draw the budget line: for example consider this two ...continues