14.3 (0) Quasimodo consumes earplugs and other things. His utility function for

Question

14.3 (0) Quasimodo consumes earplugs and other things. His utility function for earplugs z and money to spend on other goods y is given by u(z, y)-100x--+ y. (a) What kind of utility function does Quasimodo have? (b) What is his inverse demand curve for earplugs? (c) If the price of earplugs is $50, how many earplugs will he consume? (d) If the price of earplugs is $80, how many earplugs will he consume? (e) Suppose that Quasimodo has $4,000 in total to spend a month. What is his total utility for earplugs and money to spend on other things if the price of earplugs is $50?

Explanation / Answer

(a) What kind of utility function does Quasimodo have? Quasilinear. ( Actually in the utility function x is not linear but y is linear thats why its a quasi linear function)

(b) What is his inverse demand curve for earplugs? P=100x

(c) If the price of earplugs is $50, how many earplugs will he consume?50

Explanation:- ( P=100-x, x=100-P so x= 100-50 = 50)

(d) If the price of earplugs is $80, how many earplugs will he consume?20

Explanation:- ( P=100-x, x=100-P so x= 100-80 = 20)

(e) Suppose that Quasimodo has $4000 in total to spend a month. What is his total utility for earplugs and money to spend on other things if the priceof earplugs is $50? $5250

Explanation:- px=50x=50y=4000(50)(50) =1500 ( px is given in the question and x we will got from Question number C answer)

So Total Utility = u(50,1500) =$5250

(f) What is his total utility for earplugs and other things if the price ofearplugs is $80? $4200

ExplanationAns:- px=80x=20y=$2400 ( px is given in the question and x we will got from Question number D answer)

So Total Utility = u(20,2400) =$4200

(g) Utility decreases by 1050 when the price changes from $50 to $80.

Explanation:- Total utility $5250 at the price of $50 & Total utility $4200 at the price of $80 so $5250-$4200 = $1050

(h) What is the change in (net) consumer’s surplus when the price changesfrom $50 to $80? 1050.

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.