Question 12 1 point Question 12 options If an individual is

Question 12 (1 point)

Question 12 options:

\"If an individual is to maximize the utility received from consumption, he or she should spend all available income. . . .\" This statement assumes

Question 1 options:

Save

Question 10 (1 point)

Question 10 options:

Save

Question 11 (1 point)

Question 11 options:

20.

	1) .
	2) .
	3) .
	4) .

Solution

(12) Option (1)

U = min(3x, y)

So, ceteris paribus, py = 3.px

Expenditure function is:

E = [(px + 3.py) / 3] x U

(1) Option (1)

It\'s assumed that all income is spent, so savings is zero.

(10) Option (3)

U = min(x, 5y)

Budget line: I = x.px + y.py

Consumption is optimum when x = 5y or y = x/5 = 0.2x

Substituting in budget line,

I = x.px + 0.2x.py

I = (px + 0.2py).x

x = I / (px + 0.2py)

(11)

U = ln x + ln y = ln (xy)

Budget line: I = x.px + y.py

10 = x + y.py

py = (10 - x) / y

If py = 1, then 1 = (10 - x) / y

10 - x = y

x + y = 10, which has integral (whole unit) solutions.

If py = 5, then 5 = (10 - x) / y

5y = 10 - x

x + 5y = 10, which doesn\'t have non-zero integer solutions.

If py = 10, then 10 = (10 - x) /y

10y = 10 - x

x + 10y = 10, which doesn\'t have non-zero integer solutions.

Finally, if py = 20, then 20 = (10 - x) / y

20y = 10 - x

x + 20y = 10, which doesn\'t have non-zero integer solutions.

So only 1st option is correct.