Explain the substitution and income effects of a price rise for a normal good using a diagram

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Explain the substitution and income effects of a price rise for a normal good using a diagram

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Suppose Mika has budget of $600 for only two goods, x and y. The price of a Good X is $10 and the price of good Y is $25. Mika’s utility function for Good x and Good y is: UU(xx, yy) = 2xxxx. Suppose the price of a Good X increases to $15. a. What is Mika’s initial basket when the price of a Good X is $10? b. How much utility does this basket generate for Mika? c. What is Mika’s final consumption basket when the price of Good X increases to $15? d. Compute the values for the decomposition basket, B. e. Determine the numerical values of the substitution and income effects and graph your results. f. Is Good X normal or inferior goods for Mika? How do you know?
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Suppose that the price of good A and Good B are birr 3and birr 2 respectively suppose aconsumer is spending his entire income for buying 4 units of A and 6 unit of B,and the marignal utility of both 4th unit of A and 6th unit of B is 6, is the consumer at his optimal position?
As a Production Manager of a manufacturing firm that produces both an elastic good and an inelastic good, illustrate to a new board of the organisation the relationship between price elasticity of demand and total revenue, and how the elasticity concept can be used to maximise revenues of both commodities? Illustrate your answer using relevant diagrams of elastic and inelastic goods.
You are provided with the following demand and cost information for a monopolist. P=60-0.25 Q and TC=Q2+40Q+50 Where P is price, Q is quantity of the product and TC is total cost. Determine the profit maximizing level of output and prices.
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Suppose a consumer’s utility function is given a U = 100X0.25Y0.75.The prices of the two commodities X and Y are Birr 2 and Birr 5 per unit respectively. If the consumer’s income is Birr 280, how many units of each commodity should the consumer buy to maximize his/her utility?