3. George's utility function for earning $W teaching classes and spending R hours on his research isu(W, R) = W3/4R1/4. George is underpaid ($16 per hour) and overworked (80 hours total per week).How should he divide his time in order to maximise his utility?

Utility maximization is a key concept in economics, particularly in consumer theory.It describes how…

3. George's utility function for earning $W teaching classes and spending R hours on his research is u(W, R) = W3/4 R¹/4. George is underpaid ($16 per hour) and overworked (80 hours total per week). How should he divide his time in order to maximise his utility?

3. George's utility function for earning $W teaching classes and spending R hours on his research is u(W, R) = W3/4 R¹/4. George is underpaid ($16 per hour) and overworked (80 hours total per week). How should he divide his time in order to maximise his utility?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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3. George's utility function for earning $W teaching classes and spending R hours on his research is
u(W, R) = W3/4R1/4. George is underpaid ($16 per hour) and overworked (80 hours total per week).
How should he divide his time in order to maximise his utility?

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Step 1: Introduce the Concept of Utility Maximization

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Step 2: Understand the Question

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Step 3: Define the Variables and Constraints

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Step 4: Express Earnings in Terms of Research Hours

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Step 5: Substitute and Simplify the Utility Function

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Step 6: Calculate the Derivative of the Utility Function

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Step 7: Solve for the Optimal Research Hours

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Step 8: Interpret the Result and Conclude

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