« previous next »

Author Question: Lisa consumes only pizzas and burritos. In equilibrium, her marginal utility of pizza is 20 and her ... (Read 191 times)

jjjetplane

  • Hero Member
  • *****
  • Posts: 556
on: Jul 1, 2018
Lisa consumes only pizzas and burritos. In equilibrium, her marginal utility of pizza is 20 and her marginal utility of a burrito is 10. The price of a pizza is 4. What is the price of a burrito?
 
  What will be an ideal response?

Question 2

Lisa consumes only pizzas (P) and burritos (B). Her utility function is U = P0.5 B0.5. The price of per pizza is 10 and the price per burrito is 5. In equilibrium, Lisa consumes 4 pizzas. Using Lisa's utility function, calculate how many burritos she consumes.
 
  What will be an ideal response?
Microeconomics ¦ Perloff ¦ 8th Edition
Buy Test-Bank


stallen

  • Sr. Member
  • ****
  • Posts: 336
Reply #1 on: Jul 1, 2018
Answer to Question 1

In equilibrium, the ratio of the marginal utility of a pizza divided by the price of a pizza must equal the marginal utility of a burrito divided by the price of a burrito. Thus, the price of a burrito must be 2.

Answer to Question 2

The marginal utility of pizza equals B0.5/2P0.5. The marginal utility of a burrito equals P0.5/2B0.5. In equilibrium, the ratio of the marginal utilities will equal the ratio of prices. The ratio of marginal utilities simplifies to B/P. The ratio of prices is 10/5. Since we know that Lisa consumes 4 pizzas, she must consume 8 burritos.


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
« previous next »
 

Did you know?

Vital signs (blood pressure, temperature, pulse rate, respiration rate) should be taken before any drug administration. Patients should be informed not to use tobacco or caffeine at least 30 minutes before their appointment.

Did you know?

Though Candida and Aspergillus species are the most common fungal pathogens causing invasive fungal disease in the immunocompromised, infections due to previously uncommon hyaline and dematiaceous filamentous fungi are occurring more often today. Rare fungal infections, once accurately diagnosed, may require surgical debridement, immunotherapy, and newer antifungals used singly or in combination with older antifungals, on a case-by-case basis.

Did you know?

Giardia is one of the most common intestinal parasites worldwide, and infects up to 20% of the world population, mostly in poorer countries with inadequate sanitation. Infections are most common in children, though chronic Giardia is more common in adults.

Did you know?

In 1835 it was discovered that a disease of silkworms known as muscardine could be transferred from one silkworm to another, and was caused by a fungus.

Did you know?

It is believed that humans initially contracted crabs from gorillas about 3 million years ago from either sleeping in gorilla nests or eating the apes.

Vapour-liquid equilibrium acetone + water Vapour-liquid equilibrium acetone + water
A utility knife uses replaceable blades and can cut carpet and other materials. A utility knife uses replaceable blades and can cut carpet and other materials.
Kinesthesis and Equilibrium Kinesthesis and Equilibrium
An 80-g aluminum calorimeter contains 380 g of water at an equilibrium temperature of A piece ... An 80-g aluminum calorimeter contains 380 g of water at an equilibrium temperature of A piece ...
A slice of cheese pizza has a caloric content of 150 Cal. If this energy could b A slice of cheese pizza has a caloric content of 150 Cal. If this energy could b
Hardy–Weinberg Equilibrium Genotype Frequencies for Three Alleles of a Gene Hardy–Weinberg Equilibrium Genotype Frequencies for Three Alleles of a Gene
Video: The Krebs Cycle Animation

For a complete list of videos, visit our video library