ECON2GG3 MMU Budget Equations & Decomposition Basket Answers Please help me with the solution and graphs down these questions please be as specific as you

ECON2GG3 MMU Budget Equations & Decomposition Basket Answers Please help me with the solution and graphs down these questions please be as specific as you can thank you.Please clearly label the axes, curves, and equilibrium point if the question asks you to illustrate the answer in a graph. Marks will be deducted for unclear graph. ECON2GG3 ASSIGNMENT I
Due: September 27th, 2019 (Friday) in class
Requirement for all assignments:
A. The assignments can be written either alone or in a group (maximum four
students). If writing the assignments in a group, every group member’s full name
and student ID number must be clearly printed on the first page of the assignments.
You are free to choose your group member and are free to change group during
the semester. If writing the assignments in a group, each group can only submit one
copy of assignment.
B. No late assignments are accepted.
C. Please clearly label the axes, curves, and equilibrium point if the question asks you
to illustrate the answer in a graph. Marks will be deducted for unclear graph.
1. Draw indifference curves to represent the following types of consumer preferences (Put
peanut butter on the horizontal axis and jelly on the vertical axis). For each case, draw
two curves U1 and U2 (with U2>U1) and illustrate the preference direction.
a) I like both peanut butter and jelly, and always get the same additional satisfaction
from an ounce of peanut butter as I do from 2 ounces of jelly.
b) I like peanut butter, but neither like nor dislike jelly.
c) I like peanut butter, but dislike jelly.
d) I like peanut butter and jelly, but I only want 2 ounces of peanut butter for every
ounce of jelly.
e) I like to put both peanut butter and jelly on my toast. I can change the mix of peanut
butter and jelly. However, one cannot completely replace the other. I have convex
preferences.
2. Janice consumes two goods, X and Y. Janice has a utility function given by the
expression:
?? = 4?? 0.5 ?? 0.5
The current prices of X and Y are $25 and $50, respectively. Janice currently has an
income of $750 per time period (Put X on the horizontal axis and Y on the vertical
axis).
a)
b)
c)
d)
Is the assumption that “more is better” satisfied for both goods?
Calculate MRSX,Y. Determine if it is diminishing for this utility function.
Express the budget equation mathematically.
Draw a graph to illustrate the shape of a typical indifference curve. Label the curve
U1. Does the indifference curve intersect either axis? On the same graph, draw a
second indifference curve U2, with U2>U1.
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e) Determine the values of X and Y that will maximize utility in the consumption of
X and Y. Illustrate your answer on a graph.
f) Determine the total utility that will be generated for this individual.
3. Consider a consumer with the utility function U(x, y) = min(3x, 5y) , that is, the two
goods are perfect complements in the ratio y_x= 3:5. The prices of the two goods are
Px=$5 and Py=$10, and the consumer’s income is $220. Write the consumer’s budget
constraint, determine the optimum consumption basket and show it graphically (Put X
on the horizontal axis and Y on the vertical axis).
4. Paul consumes only two goods, pizza (P) and hamburgers (H) and considers them to
be perfect substitutes, as shown by his utility function: U = P + 4H . The price of pizza
is $3 and the price of hamburgers is $6, and Paul’s monthly income is $300 (Put pizza
on the horizontal axis and hamburgers on the vertical axis).
a) Express the budget equation mathematically.
b) Find the optimal combination of X and Y that will maximize Paul’s utility.
c) Knowing that he likes pizza, Paul’s grandmother gives him a birthday gift
certificate of $60 redeemable only at Pizza Hut. Though Paul is happy to get this
gift, his grandmother did not realize that she could have made him exactly as happy
by spending far less than she did. How much would she have needed to give him in
cash to make him just as well as off as with the gift certificate? Illustrate your
answer on a graph.
5. Linda consumes only two goods, x and y. Her utility function ?? = ????. The initial
price of x is $9 and the price of y is $1, and her weekly income is $72. Suppose that
the price of x subsequently drops to $4.
a) Find the initial consumption basket A when the price of x is $9.
b) Find the final consumption basket C when the price of x is $4.
c) Find the decomposition basket B.
d) Find the numerical values of the income and substitution effects on x
consumption.
e) Graph the results.
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