1. Problems 5.1 Thirsty Ed drinks only pure spring water, but he can purchase it in two different-sized containers: 0.75 liter and 2 liter. Because the water itself is identical, he regards these two "goods" as perfect substitutes. Let a represent the quantity of 0.75-liter containers and y represent the quantity of 2-liter containers. Assume Ed's utility is equal to the total quantity of water consumed and that the containers themselves yield no utility. Which of the following functions best represents Ed's utility? OU= min(0.75x, 2y) OU = x0.75+ y² OU = 20.752 OU=0.75x + 2y I 0.75 When then the demand function for a is x*= Px and the demand function for y is y* - Px Py I I 0.75 When then the demand function for æ is x*= Py and the demand function for y is y*= Py+Px Px Py 0 The following graph shows the demand function for æ, holding I and py. I Py I Px
1. Problems 5.1 Thirsty Ed drinks only pure spring water, but he can purchase it in two different-sized containers: 0.75 liter and 2 liter. Because the water itself is identical, he regards these two "goods" as perfect substitutes. Let a represent the quantity of 0.75-liter containers and y represent the quantity of 2-liter containers. Assume Ed's utility is equal to the total quantity of water consumed and that the containers themselves yield no utility. Which of the following functions best represents Ed's utility? OU= min(0.75x, 2y) OU = x0.75+ y² OU = 20.752 OU=0.75x + 2y I 0.75 When then the demand function for a is x*= Px and the demand function for y is y* - Px Py I I 0.75 When then the demand function for æ is x*= Py and the demand function for y is y*= Py+Px Px Py 0 The following graph shows the demand function for æ, holding I and py. I Py I Px
Chapter4: Utility Maximization And Choice
Section: Chapter Questions
Problem 4.5P
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