# Assume that Sam has following utility function: U(x,y) = 2√x+y. Assume px = 1/5, py = 1 and her i...

###### Question:

Assume that Sam has following utility function: U(x,y) = 2√x+y.

Assume px = 1/5, py = 1 and her income I = 10.

(e) Draw an optimal bundle which is the result of utility maximization under given budget set. (Hint: Assume interior solution). Deﬁne corresponding expenditure minimization problem (note the elements for expenditure minimization problem are (i) objective function, (ii) constraint, (iii) what to choose).

(g) Consider a price increase for the good x from px = 1/5 to p0x = 1/2. Find new optimal bundle under new price using a graph that shows the change in budget set and the change in optimal bundle when the price increases.

(h)Following(g),ﬁnd the utility level of optimal bundle under old price. Similarly, ﬁnd the utility level of optimal bundle under new price.

(i)Describe substitution effect and income effect with a graph for the price change from px = 1/5 to p0x = 1/2.

(j) Describe three different measures (from the lecture) to evaluate welfare change from a price change.

(k) Following (g), show that these three measures are the same using a graph (or an algebra).

#### Similar Solved Questions

##### The life expectancy at birth of both sexes in a particular year can be described by...
The life expectancy at birth of both sexes in a particular year can be described by the function ​f(x)=11.51+ 14.71 ln x​, where x represents the number of years after 1900. Use this function to determine the life expectancy in 2032....
##### A patient is talking is taking the NSAID, indomethacin for treatment of pericarditis. The nurse will...
A patient is talking is taking the NSAID, indomethacin for treatment of pericarditis. The nurse will teach the patients watch for witch adverse effect ?...
##### 3. A local authority suspects that the amount per container is less than 16 oz (as...
3. A local authority suspects that the amount per container is less than 16 oz (as advertised). After extracting a random sample, the inspector found that the sample mean indeed is less than 16 oz. Select the correct statement: (5 points) (a) This is an upper-tail test (b) This is a lower-tail test ...
##### How do you multiply e^(( 3 pi )/ 4 i) * e^( 3 pi/2 i )  in trigonometric form?
How do you multiply e^(( 3 pi )/ 4 i) * e^( 3 pi/2 i )  in trigonometric form?...
##### If x^2=-4,what is the value of x?(There should not exist any imaginary number)
If x^2=-4,what is the value of x?(There should not exist any imaginary number)...
##### Implement this function as an external function
Write a "C" program to implement the function interface below as an external function. test your solution using the stub program shown below.-------------------------------------------------------------------------------------------------------void CalculateTaxes(float gross,float deferred,f...
##### Please leave a sentence or two to explain what you did for each step. thank you!
please leave a sentence or two to explain what you did for each step. thank you! Solve the following problem in THREE different ways: (1) scaling, (2) unit-rate thinking, and then (3) a representative sets diagram. Clearly explain your work AND the mathematical reasoning for each solution style. ...