« previous next »

Author Question: Lisa consumes only pizzas and burritos. In equilibrium, her marginal utility of pizza is 20 and her ... (Read 213 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?

The human body produces and destroys 15 million blood cells every second.

Did you know?

Approximately one in four people diagnosed with diabetes will develop foot problems. Of these, about one-third will require lower extremity amputation.

Did you know?

Human stomach acid is strong enough to dissolve small pieces of metal such as razor blades or staples.

Did you know?

There are more nerve cells in one human brain than there are stars in the Milky Way.

Did you know?

Many people have small pouches in their colons that bulge outward through weak spots. Each pouch is called a diverticulum. About 10% of Americans older than age 40 years have diverticulosis, which, when the pouches become infected or inflamed, is called diverticulitis. The main cause of diverticular disease is a low-fiber diet.

Vapour-liquid equilibrium acetone + water Vapour-liquid equilibrium acetone + water
Chemical equilibrium and the law of mass action. Chemical equilibrium and the law of mass action.
Vegetables are a low-saturated-fat topping for pizza Vegetables are a low-saturated-fat topping for pizza
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 ...
The dissociation equilibrium constants for the protonated form of alanine (a diprotic amino ... The dissociation equilibrium constants for the protonated form of alanine (a diprotic amino ...
One generation of random mating produces Hardy–Weinberg equilibrium One generation of random mating produces Hardy–Weinberg equilibrium
Video: Primary and secondary response to infection

For a complete list of videos, visit our video library