Question

Consider an individual who has preferences over Hamburgers (H) and Soda (S) represented by the following...

Consider an individual who has preferences over Hamburgers (H) and Soda (S) represented by the following utility function: U(H,S)=H^0.9 + 3S. The price of a Hamburger is $4 and the price of a Soda is $3. The individual has a budget of B (you don’t know the exact amount). You are given the following marginal utilities: MUH=0.9H^ -0.1, MUS=3.

A) Find the demand functions for this individual.

B) Characterize what will happen over every feasible size of B (ie. zero to infinity). There are multiple cases to consider (Hint: Try to think about what happens to MUH when H=0, then what happens as it increases).

C) Suppose the individual tells you (assuming they satisfy all standard assumptions made at the consumer level) that they consume 2 sodas. What is their budget?

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Below there is a explained about the answer is fully explained in photo

Please rate if it helped

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
An individual has preferences for an aggregate consumption commodity (x) and health (H) represented by a...
An individual has preferences for an aggregate consumption commodity (x) and health (H) represented by a utility function U(x, H) = αln(x) + βln(H). The price of the aggregate commodity (x) is px and the price of medical care (m) is pm. The input of medical care (m) produces health (H) via a health production relationship that can be presented by the function g(m) = ln(m); that is H = ln(m). a. Compute the optimal demand for medical care (m),...
Consider a consumer who has preferences over consumption (x) and leisure (L) represented by u(L, x)...
Consider a consumer who has preferences over consumption (x) and leisure (L) represented by u(L, x) = 10 ln L + 5 ln x. The consumer has 24 hours in the day (T = 24) to divide between work and leisure. The consumer can choose however many hours they want to work. For each hour of work they are paid a wage given by w = 10. Consumption (x) costs 1 per unit. (a) Initially suppose that the consumer has...
A consumer’s preferences over two goods (x1,x2) are represented by the utility function ux1,x2=5x1+2x2. The income...
A consumer’s preferences over two goods (x1,x2) are represented by the utility function ux1,x2=5x1+2x2. The income he allocates for the consumption of these two goods is m. The prices of the two goods are p1 and p2, respectively. Determine the monotonicity and convexity of these preferences and briefly define what they mean. Interpret the marginal rate of substitution (MRS(x1,x2)) between the two goods for this consumer.   For any p1, p2, and m, calculate the Marshallian demand functions of x1 and...
Consider a student who purchases education (x) and other goods (y). The student has preferences over...
Consider a student who purchases education (x) and other goods (y). The student has preferences over these goods given by u(x, y) = ln(x) + 3ln(y). The prices of education and other goods are, respectively, px = 10 and py = 5, and the student’s income is I = 20. A. Graph the budget constraint, IEP, optimal bundle (x ∗ , y∗ ), and the indifference curve passing through the optimal consumption bundle. Label all curves, axes, slopes, and intercepts....
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT