Order the answer to: Sam’s utility function for his…
| Question | Sam’s utility function for his monthly consumption of goods X and Y is U(X,Y) = 100X – X2 + Y. (Assume this function applies only for bundles that contain no more than 100 units of X; bundles with greater amounts of X are not relevant for this question). For this utility function, MUX = 100 – 2X, and MUY = 1. Sam’s monthly income is $3,000, and the price of Y is $1. a. What is Sam’s uncompensated demand function for X, as a function of Px? b. Suppose the price of X is initially $20, and that it rises to a price greater than $20. What is Sam’s compensating variation for this price change (expressed as a function of Px)? c. What is Sam’s compensated demand function for good X, fixing the utility level he achieved at the original price of good X (Px=$20)? How does it compare to your answer in part (a)? Why? d. Compute the change in consumer surplus for t is change to a price Px greater than $20. How does it compare to your answer in part (b)? |
|---|---|
| Subject | business-economics |
Have a writer answer this question by clicking below. If you have any questions you can contact us via live chat.
