7. The Phillie Phanatic always eats his ballpark franks in a special way- I foot-long hot dog together with precisely 1 bun, 1 oz. of mustard, and 2 oz. of pickle relish. His utility is a function only of these four items and any extra amounts of a single item without the other constituents is worthless. a. What form does PP's utility function for these four goods have? b. How might we simplify matters by considering PP's utility to be a function of only one good? What is that good? c. Suppose foot-long hot dogs cost $1, buns cost $.50, mustard costs $.05 per oz, and pickle relish costs $.1 5 per oz. How much does the good defined in part b cost? d. If the price of foot-long hot dog increases by 50 percent (to $1.50) what is the percentage increase in the price of the good? How would a 50% increase in the price of the bun affect the price of the good? Why is the answer different from part d? e. f. If the government wanted to raise $1 in taxes by taxing the goods that PP buys, how should it spread this tax over the four goods so as to minimize the utility cost to PP2

7. The Phillie Phanatic always eats his ballpark franks in a special way- I foot-long hot dog together with precisely 1 bun, 1 oz. of mustard, and 2 oz. of pickle relish. His utility is a function only of these four items and any extra amounts of a single item without the other constituents is worthless. a. What form does PP's utility function for these four goods have? b. How might we simplify matters by considering PP's utility to be a function of only one good? What is that good? c. Suppose foot-long hot dogs cost $1, buns cost $.50, mustard costs $.05 per oz, and pickle relish costs $.1 5 per oz. How much does the good defined in part b cost? d. If the price of foot-long hot dog increases by 50 percent (to $1.50) what is the percentage increase in the price of the good? How would a 50% increase in the price of the bun affect the price of the good? Why is the answer different from part d? e. f. If the government wanted to raise $1 in taxes by taxing the goods that PP buys, how should it spread this tax over the four goods so as to minimize the utility cost to PP2

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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