Im trying to get through some economics questions so im prepared for
my test. The questions posted are the ones I have been having some
trouble with. Please Answer them and include graphs wherever they
would be helpful in explaining the question proposed.

QUESTION:
Do any goods have negative marginal utility?  Increasing marginal utility?

QUESTION:
Why is utility maximized if MU1/P1=MU2/P2?

QUESTION:
What do we mean when we say people have well behaved preferences?

QUESTION:
Assume a consumer has an income of $250, the price of X1 is $10 and
the price of X2 is $8.  Draw the set of all feasible combinations that
can be consumed.  What happens to the graph if the price of X2
decreases to $5.  Show an individual maximizing their utility after
the price change.  How much of X1 and X2 are consumed at that utility
maximizing point.  How do you know their utility is maximized where
you drew it.  Can you derive a demand curve for X1? For X2?  If you
answered yes to the preceding, do it.

QUESTION
What happens to the demand for anchovies, the quantity of anchovies
demanded, the supply of anchovies and the quantity of anchovies
supplied when the price of soybeans decreases dramatically.  For
purposes of your answer, assume anchovies and soybeans are both used
as a high protein food product.

QUESTION:
The following data points were identified from some recent work into
the demand for hemp clothing products:
Point	Q	P
A	450	20
B	650	16
C	350	25

Graph the demand curve.   Show your  work, using the midpoint formula,
what is the elasticity of demand with respect to price moving from
point C to point A.  If the manufacturer comes to you with the
question, ?How can we increase revenues?? what recommendation would
you make?  Why?  If we had moved  from point B to A would your answer
change.  Why?


QUESTION:
In the US, we used to look at the old Soviet Union, where bread cost 5
cents/loaf and everyone could afford it but you had to stand in line 6
hours to buy a loaf, and say how terrible.  In the old Soviet Union,
they looked at the US, where bread cost $1/loaf and you didn?t have to
stand in line to buy it but 10% of the population couldn?t afford to
buy bread, and say how terrible.  Using a simple supply and demand
framework, analyze the respective situations.  Who was right?  Which
situation was worse?  Explain how you came to your conclusion.

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Clarification of Question by linked2net-ga on 06 Apr 2004 22:39 PDT

I need an answer by 4/7 at 3:30-4:00PM... please leave a message here
if you have any questions, and tell me if the amount the question is
priced at needs revision. Thanks!

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Request for Question Clarification by hibiscus-ga on 07 Apr 2004 01:55 PDT

Hi linked2net, 

I'd be happy to help you out with this question, but due to a shortage
of time I don't think I can reasonably finish it and provide you with
quality answers for each section.  You might have better luck
splitting this into several separate questions.  Certainly I would be
able to answer a few of these for you by your deadline, and I'm sure a
few other researchers could do the rest.

Hibiscus

The price of anchovies will decrease except some buyers previously
contracted to buy at a specified price.
 The quantity of ancohvies decreases as some producers will stop
producing until the price rises. More anchovies will rot while waiting
for a purchaser, so this effectively reduces the quantity and the
supply. For ancovies, I see little distintion between quantity and
supply (nor the offered/delivered) but there may be an important
distintion unknown to me.
 In the real world, it is unlikely a high percentage of consumers will
consider soy beans and anchovies interchangeable.   Neil

While different people put a different value on their time, most would
agree five hours and fifty some minutes is worth  more than $.95; so
the bread was typically more costly in the old Soviet Union.
 In the USA, if they can not afford a dollar; often they can't afford
a nickle, so comparitively few are affected, where as all but a
priveleged few were effected in the old Soviet Union. Likely the
condition resulted in death (indirectly) several times more often than
in the USA, so USA is better for this reason and several indirect
reasons.   Neil

i suppose drugs are a good that can have negative marginal utilitY: od
and die.  where something is said to be an "acquired taste", at some
point on the curve marginal utility must be increasing.
if MU1/P1=MU2/P2 then it is possible to obatin greater utility within
the budget constraint by changing the consumption combination.
well behaved preferences are convex.
if the price of soybeans declines, you have an substitution effect
that reduces demand for anchovies and an income effect that could have
a positive influence on demand for anchovies.  common sense in regard
to the demand elasticities for these kinds of foods suggests that the
substutution effect will dominate.

i suppose drugs are a good that can have negative marginal utilitY: od
and die.  where something is said to be an "acquired taste", at some
point on the curve marginal utility must be increasing.
if MU1/P1=MU2/P2 does not hold then it is possible to obatin greater
utility within the budget constraint by changing the consumption
combination.
well behaved preferences are convex.
if the price of soybeans declines, you have an substitution effect
that reduces demand for anchovies and an income effect that could have
a positive influence on demand for anchovies.  common sense in regard
to the demand elasticities for these kinds of foods suggests that the
substutution effect will dominate.