7.5 Suppose housing (H) and air quality (A) are the only two things entering into Jose's utility and Jose's utility function is U(H, A) = A × H. Suppose Jose's income is $10 and the price of housing is $2. a. If air quality is A = 2, how much housing will Jose purchase? Plot Jose's indifference curve and budget constraint through this point, showing how much housing is consumed. b. Suppose air quality rises to A = 4. Plot Jose's new indifference curve and new consump- tion point. c. How much would Jose be willing to pay to increase air quality from 2 to 4?
7.5 Suppose housing (H) and air quality (A) are the only two things entering into Jose's utility and Jose's utility function is U(H, A) = A × H. Suppose Jose's income is $10 and the price of housing is $2. a. If air quality is A = 2, how much housing will Jose purchase? Plot Jose's indifference curve and budget constraint through this point, showing how much housing is consumed. b. Suppose air quality rises to A = 4. Plot Jose's new indifference curve and new consump- tion point. c. How much would Jose be willing to pay to increase air quality from 2 to 4?
Microeconomics A Contemporary Intro
10th Edition
ISBN:9781285635101
Author:MCEACHERN
Publisher:MCEACHERN
Chapter6: Consumer Choice And Demand
Section: Chapter Questions
Problem 6QFR
Question
![7.5 Suppose housing (H) and air quality (A) are the only two things entering into Jose's
utility and Jose's utility function is U(H, A) = A × H. Suppose Jose's income is $10 and
the price of housing is $2.
a. If air quality is A = 2, how much housing will Jose purchase? Plot Jose's indifference
curve and budget constraint through this point, showing how much housing is consumed.
b. Suppose air quality rises to A = 4. Plot Jose's new indifference curve and new consump-
tion point.
c. How much would Jose be willing to pay to increase air quality from 2 to 4?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1542e5de-e392-4bdb-9d95-e5abdf8e6267%2F76c3a014-5b1e-4f4c-9728-7493661c9d00%2F4hj38s8_processed.jpeg&w=3840&q=75)
Transcribed Image Text:7.5 Suppose housing (H) and air quality (A) are the only two things entering into Jose's
utility and Jose's utility function is U(H, A) = A × H. Suppose Jose's income is $10 and
the price of housing is $2.
a. If air quality is A = 2, how much housing will Jose purchase? Plot Jose's indifference
curve and budget constraint through this point, showing how much housing is consumed.
b. Suppose air quality rises to A = 4. Plot Jose's new indifference curve and new consump-
tion point.
c. How much would Jose be willing to pay to increase air quality from 2 to 4?
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