1. Anna was interested in Felix's preferences regarding air quality in Santiago. She reasoned that since air pollution could be washed off with soap, Felix should view air quality (A) and soap (S) as substitutes. Air quality is measured by an index, with larger values corresponding to higher quality. Holding annual soap consumption 150 CHAPTER 7 DEMAND FOR ENVIRONMENTAL GOODS at five bars, she asked Felix to picture his utility with air quality at three different levels: 2, 4, and 5. Call these initial situations 1, 2, and 3, yielding utility U, U, and 22 o to onno sd Tiood: bU. At each of these levels of air quality, she tried varying the amount of soap, asking how air quality should change to keep utility constant. During this mental experi- ment, she asked Felix to imagine his consumption of all other goods was fixed. She obtained the following data, showing values of A to keep utility constant at the three elai doo dsloond 03 $12T29 FAboloi spp ipclcum initial levels (U,U2,U) pA L IR CIUnon- 2 69uley isy Air quality (A) at 1:ls eboog To ive 1 boamob obuass 01 2 S U2 Us 5olasvsx 00 Borsd abohsmcwn oin no pac o bug hsboris bidt srdz borod ai ba Sotountano bos lein 1 10 20 25 go gndboaal is 2 5 10 12.5 3 3 1/3 6 2/3 81/3 a e 5 2 2.5 6 1/4 isuhe iood boog latno boop dhnie io 2oibuns er 4 86 5 4 5 ub 4.17 6 1 2/3 3 1/3 boe 0m betora 03 yLale omo S16 7 1.43 2.86 3.57 1.25 21/2 3 1/8 9 1.11 2.22 2.78 fer AL aboop Sy 1 10 01 2.5 A 2 b no at Plot the three indifferences curves for soap and air quality implied by these data. boog air quality level 5. Felix
1. Anna was interested in Felix's preferences regarding air quality in Santiago. She reasoned that since air pollution could be washed off with soap, Felix should view air quality (A) and soap (S) as substitutes. Air quality is measured by an index, with larger values corresponding to higher quality. Holding annual soap consumption 150 CHAPTER 7 DEMAND FOR ENVIRONMENTAL GOODS at five bars, she asked Felix to picture his utility with air quality at three different levels: 2, 4, and 5. Call these initial situations 1, 2, and 3, yielding utility U, U, and 22 o to onno sd Tiood: bU. At each of these levels of air quality, she tried varying the amount of soap, asking how air quality should change to keep utility constant. During this mental experi- ment, she asked Felix to imagine his consumption of all other goods was fixed. She obtained the following data, showing values of A to keep utility constant at the three elai doo dsloond 03 $12T29 FAboloi spp ipclcum initial levels (U,U2,U) pA L IR CIUnon- 2 69uley isy Air quality (A) at 1:ls eboog To ive 1 boamob obuass 01 2 S U2 Us 5olasvsx 00 Borsd abohsmcwn oin no pac o bug hsboris bidt srdz borod ai ba Sotountano bos lein 1 10 20 25 go gndboaal is 2 5 10 12.5 3 3 1/3 6 2/3 81/3 a e 5 2 2.5 6 1/4 isuhe iood boog latno boop dhnie io 2oibuns er 4 86 5 4 5 ub 4.17 6 1 2/3 3 1/3 boe 0m betora 03 yLale omo S16 7 1.43 2.86 3.57 1.25 21/2 3 1/8 9 1.11 2.22 2.78 fer AL aboop Sy 1 10 01 2.5 A 2 b no at Plot the three indifferences curves for soap and air quality implied by these data. boog air quality level 5. Felix
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:1.
Anna was interested in Felix's preferences regarding air quality in Santiago. She
reasoned that since air pollution could be washed off with soap, Felix should view
air quality (A) and soap (S) as substitutes. Air quality is measured by an index, with
larger values corresponding to higher quality. Holding annual soap consumption
Transcribed Image Text:150
CHAPTER 7 DEMAND FOR ENVIRONMENTAL GOODS
at five bars, she asked Felix to picture his utility with air quality at three different
levels: 2, 4, and 5. Call these initial situations 1, 2, and 3, yielding utility U, U, and
22
o to onno sd Tiood: bU. At each of these levels of air quality, she tried varying the amount of soap, asking
how air quality should change to keep utility constant. During this mental experi-
ment, she asked Felix to imagine his consumption of all other goods was fixed. She
obtained the following data, showing values of A to keep utility constant at the three
elai doo dsloond
03
$12T29 FAboloi
spp ipclcum
initial levels (U,U2,U)
pA L IR CIUnon-
2
69uley
isy
Air quality (A) at
1:ls
eboog
To ive 1 boamob obuass 01 2
S
U2
Us
5olasvsx 00 Borsd abohsmcwn oin no
pac o bug
hsboris bidt srdz
borod ai ba
Sotountano bos lein
1
10
20
25
go gndboaal
is
2
5
10
12.5
3 3 1/3
6 2/3 81/3
a e 5
2
2.5
6 1/4
isuhe iood boog latno
boop dhnie io 2oibuns
er
4
86
5
4
5
ub
4.17
6
1 2/3
3 1/3
boe
0m betora
03 yLale omo
S16
7
1.43
2.86
3.57
1.25 21/2
3 1/8
9
1.11
2.22
2.78
fer
AL aboop
Sy 1 10
01
2.5 A
2
b no
at
Plot the three indifferences curves for soap and air quality implied by these data.
boog
air quality level 5. Felix
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