Question

Gordon’s preferences can be represented by the utility function u(x,z) = 100x + x2/2 + z, where x is his consumption of gin and z denotes the amount of money left over to spend on other stuff. If he has $10,000 to spend on gin and other stuff and if the price of gin rises from $50 to $70 then the change in his consumer surplus is

Select one:

a. a fall of $1600.

b. a fall of $2,800.

c. a fall of $800.

d. an increase of $400.

e. a fall of $600.

Answer 1

Explanation:-

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