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(Solved) 3. For each of the following, use the concept of revealed preferences to rank the two bundles of goods. If you cannot rank them, explain why. (a) The...


3. For each of the following, use the concept of revealed preferences to rank the two bundles of goods. If you cannot rank them, explain why. (a) The price of 3 Brooks Brothers suits is $3000. The price of one Ander- son and Sheppard suit is $5000. Bruce chooses to buy an Anderson and Sheppard suit (b) The price of a bottle of 2007 Chateau d’Yquem is $249. The price of a bottle of (no vintage) Boone’s Farm is $2.79. Dana buys a bottle of Boone’s Farm. (c) Travis offers to buy Danielle a $100 dinner (he pays). She instead buys a cat for $20. 4. Suppose Michelle makes a trip to a candy store where she intends to purchase two goods: gummy worms (g) and donkeys (d). Her utility function is U = gd. (a) Suppose the price of gummy worms is 2 and she has $200 in income. Derive an expression for her demand curve for donkeys. (b) Suppose the price of gummy worms is 2 and the price of donkeys is 100. Derive an expression for her Engel curve for donkeys. (c) Use your answer from (b) to derive her income elasticity of demand for donkeys when her income is $200.
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