pose the utility that Professor Price derives from consuming commodities A and a
ID: 3362659 • Letter: P
Question
pose the utility that Professor Price derives from consuming commodities A and are as follows: College is as follows: uantity of A Total Utility of B 0 0 300 550 700 850 900 950 0 1100 2100 3000 3800 1500 5100 3 6 a. Suppose Professor Price income is $250, and the price per unit of comm are $10 and S100 respectively. If Professor Price is a utility and net benefit maximizer, how odities A and B many units of each commodity will he purchase? Why? b. If Professor Price' income decreased to $50, how many units of each co he consume if he were a utility and net benefit maximizer? Why? 2. Complete question #10 on p. 274 (4th edition), in your textbook.Explanation / Answer
a)
Because of the financial constraint,
$10 * X + $100 * Y = 250
z = Max ( Utility of X units of A + Y units of B)
X,Y = 0 to 6
Thus, for max utility,
Y = 2
X = 5
Utitlity = 2100 + 900
= 3000
Thus, 2 units of B and 5 units of A.
If the income is reduced,
$10 * X + $100 * Y = 200
z = Max ( Utility of X units of A + Y units of B)
X,Y = 0 to 6
Thus,
X = 0
Y = 2
Thus, 0 units of A and 2 units of B should be consumed to maximize the uitility.
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