Business, 14.02.2020 22:49 arivalen

Jane is the manager of a local bank branch in College Station where he consumes bundles of two commodities x and y. Prices in College Station are px=1 and py=5. He is offered a transfer to Dallas where prices are px=4 and py=5; Jane is guaranteed a salary in Dallas with which he would be able to buy exactly what he buys in College Station. Jane’s utility function is U(x, y)=xy2 and his income in College Station is $6000. What happens to Janes’s utility if she accepts the transfer (Jane’s utility maximization is always characterized by the tangency rule)?

Answers: 1

Show answers

Answers

Answer from: gerardogonzale2294

Remain the same

Explanation:

$U(x,y) = xy^{2}$ ......................................................... (1)

ICS = Income in College Station = $6,000

CSpx = Price of x in College Station = 1

CSpy = Price of y in College Station = 5

ID = Income in Dallas = ?

Dpx = Price of x in Dallas = 4

Dpy = Price of y in Dallas = 5

Step 1

Assume that Jane always divides his income in College Station equally into two, i.e. $3,000 each, to buy x and y, the quantities of x and y he can buy in College Station can be calculated by dividing the $3,000 by the prices of x and y. This is calculated as follows:

CSqx = Quantity of x in College Station = $3,000 ÷ 1

= 3,000 units

CSqy = Quantiy of y in College Station = 3,000 ÷ 5

= 600 units

Jane's utility in College Station can be calculated by amending equation (1) and substituting 3,000 units for x and 600 units for y as follows:

$CSU(CSqx,CSqy) = (CSqx.CSqy^{2})$

$CSU(3000,600) = (3000*600^{2})$

= 3,000 * 360,000

CSU(3000, 600) = 1,080,000,000 utils .......................... (2)

Step 2

Since Jane is guaranteed a salary in Dallas with which he would be able to buy exactly what he buys in College Station, this implies that the salary in Dallas will make him to be able to buy 3,000 units of good x and 600 units of good which he currently buys in College Station.

Since

CSpx = 1, which is less than Dpx = 4

But

CSpy = 5, is equal to Dpy = 5

We need to calculate how much his Income will increase in Dallas to be able to buy 3,000 units of good x in Dallas given that its price is $4. Therefore, his income will increase by multiplying $4 by 3000 units and deduct $3,000 he was spending in College Station on x as follows:

IID = Increase in Income in Dallas = (3,000 * $4) - $3,000

= $12,000 - $3,000

= $9,000

Therefore, ID (Income in Dallas) is the addition of IDD and ICS (Income in College Station) calculated as:

ID = IID + ICS

= $9,000 + $6,000

= $15,000

Conclusion

With the ID of $15,000, Jane will be spending $12,000 to buy 3,000 units of good x in Dallas and continue to spend $3,000 to buy 600 units of good y in Dallas.

This will make Jan's utility in Dallas (DU) to be equal to 1,080,000,000 utils as obtained in equation (2) above.

Therefore, Jane's utility will remain the same based on the tangency rule which states that a consumer will choose a combination of two goods at which an indifference curve is tangent to the budget line, i.e. his income.

Answer from: Quest

Ibelieve the answer is ethos which is an appeal to ethics

Answer from: Quest

Having a long credit that will be corrected is better that a short credit that is clear is simply because with long credit history, a prospective lender can see how you have operated your credit facility over a considerable period. nobody's credit history is perfect - everyone has at least 1 or 2 lapses on their record. have short history of your credit doesn't show patterns or trends of persistent late payments.

Other questions on the subject: Business

Business, 21.06.2019 17:10, candaceblanton

Titus manufacturing, inc. provided the following information for the year: purchases - direct materials $91,000 plant utilities and insurance 68,000 indirect materials 11,170 indirect labor 4270 direct materials used in production 99,000 direct labor 117,500 depreciation on factory plant & equipment 4000the inventory account balances as of january 1 are given below. direct materials $44,000 work-in-progress inventory 10,000 finished goods inventory 50,000what is the ending balance in the direct materials account? $135,000 $36,000 $110,170 $6000

Answers: 3

continue

Business, 21.06.2019 21:30, haley816

Big trail running company has started to produce running apparel in addition to the trail running shoes that they have manufactured for years. they feel that a departmental overhead rate would best reflect their overall manufacturing overhead usage. based on research the following information was gathered for the upcoming year: machining department finishing department estimated manufacturing overhead by department $ 600 comma 000 $ 400 comma 000 trail running shoes 440 comma 000 machine hours 11 comma 000 direct labor hours running apparel 60 comma 000 machine hours 39 comma 000 direct labor hours manufacturing overhead is driven by machine hours for the machining department and direct labor hours for the finishing department. at the end of the year, the following information was gathered related to the production of the trail running shoes and running apparel: machining department finishing department trail running shoes 442 comma 000 hours 10 comma 500 hours running apparel 57 comma 000 hours 40 comma 000 hours how much manufacturing overhead will be allocated to the trail running shoes

Answers: 3

continue

Business, 22.06.2019 11:00, 1129682

Factors like the unemployment rate, the stock market, global trade, economic policy, and the economic situation of other countries have no influence on the financial status of individuals. true or false

Answers: 1

continue

Business, 22.06.2019 23:10, smcardenas02

Powell company began the 2018 accounting period with $40,000 cash, $86,000 inventory, $60,000 common stock, and $66,000 retained earnings. during 2018, powell experienced the following events: sold merchandise costing $58,000 for $99,500 on account to prentise furniture store. delivered the goods to prentise under terms fob destination. freight costs were $900 cash. received returned goods from prentise. the goods cost powell $4,000 and were sold to prentise for $5,900. granted prentise a $3,000 allowance for damaged goods that prentise agreed to keep. collected partial payment of $81,000 cash from accounts receivable. required record the events in a statements model shown below. prepare an income statement, a balance sheet, and a statement of cash flows. why would prentise agree to keep the damaged goods?

Answers: 2

continue

You know the right answer?

Jane is the manager of a local bank branch in College Station where he consumes bundles of two commo...