function[pic]. 1) Is the assumption that ‘more is better’ satisfied for both goods? 2) What is [pic] for this utility function? 3) Is the [pic] diminishing‚ constant‚ or increasing as the consumer substitutes [pic] for [pic] along an indifference curve? 2. (25 points) A consumer purchases two goods‚ food [pic] and clothing [pic]. Her utility function is given by [pic]. The price of food is [pic] ‚ the price of clothing is [pic]‚ and the consumer’s income is [pic]. 1) What
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| |Worldwide operational centers |Expected growth in GDP | |Product Diversification |Shifts in consumer preferences and emergence of internet | |Large Market Share |Growth in Business Population Size | |Talented leaders and employees
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Income and Substitution Effects — A Summary What are Income and Substitution Effects? When the price of q1‚ p1‚ changes there are two effects on the consumer. First‚ the price of q1 relative to the other products (q2‚ q3‚ . . . qn) has changed. Second‚ due to the change in p1‚ the consumer’s real income changes. When we compute the change in the optimal consumption as a result of the price change‚ we do not usually separate these two effects. Sometimes we might want to separate the effects.
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very high with teenagers and young women. The business has increased its supply of Capri jeans due to the high demand. The owner‚ Terri Johnson‚ contemplates increasing the price from $9.00 to $10.00. Ms. Johnson needs to know the response of the consumers to the increased price. According to McConnell and Brue (2004)‚ the Price Elasticity of Demand measures the rate of response of quantity demanded due to a price change (p. 1). Using Price Elasticity of Demand In calculating the Price Elasticity
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local economy is insignificant compared to the costs of the stadium. However‚ the literature has ignored the welfare gain generated by a stadium. The annual consumer surplus generated by a stadium is calculated from a simple demand curve for baseball games using 1972 to 1991 data on ticket prices and attendance. Estimates of the consumer surplus are in the range of $2.2 million to $54.1 million per season. Further‚ the annual net benefit of a stadium exclusive of any induced economic activity
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goods for example Nike sports shoes‚ because it is more difficult to find good substitutes for sports shoes. The demand for a product tend to be price inelastic in the short run but becomes more price elastic in the long run. This is because consumers will replace the products with new substitutes over time and their habits may change over time.
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Homework 3 Due 2/24/14 1) Using a diagram‚ show that‚ if a consumer prefers more to less then his indifference curves cannot cross. 2) Suppose that current and future consumption are perfect substitutes. The indifference curves will consist of parallel lines with the negative slope m‚ where m > 0. a) How does the marginal rate of substitution between current and future consumption relate to the geometry (i.e. the slope and the intercept) of the consumer’s indifference curves? b) Given
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brought about by changes in their demand and supply. Hence in this system the price mechanism plays a very important role and as a result some individuals believe that freedom of choice is better able to promote a positive investment climate. Thus consumers prefer the price mechanism for several reasons. Firstly it indicates consumer’s wants where a product is relatively scarce‚ consumer’s competition for the limited supply will cause its price to rise
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demand will also rise. C. price has no effect on quantity demanded. D. as price falls‚ quantity demanded rises. 2. Which of the following would not shift the demand for good A? A. Drop in price of good A. B. Drop in price of good B. C. Consumer income. D. Change in the level of advertising of good A. 3. If good A is an inferior good‚ an increase in income leads to: A. a decrease in the demand for good B. B. a decrease in the demand for good A. C. an increase in the demand for
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Because trade and consumer products are] readily available throughout the world‚ globalization impacts the purchase of items. Items such as Hello-Kitty‚ Coma-con and anima are both popular cultures that have made their way to the United States. Fast food franchise‚ especially McDonald’s‚ is a pop culture found throughout the world from the Virgin Island to France. Globalization will continue to impact popular culture in all aspect of all countries‚ as long as the consumer has choices.
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