At least during 2020 international travel and vacationing was very re-stricted. National travel was also restricted as was things that one usuallydoes on a vaction, e.g. going to a restaurant. Let's assume that a typicalconsumer has the following utility function over going on a vacation trip(v) and other consumption goods (0):U(v, 0) = v0.10,0.90Assume that the relative price of a vacation trip in terms of other goodswas equal to one (p = = 1) and the yearly disposable income of theaverage consumer was I= 300, 000kr.(a) Solve the consumer's utility maximization problem. How much wouldshe had spent on vacationing and other goods if there had been nopandemic? What would her utility have been?(b) The restrictions to travel during the pandemic could be expressed inthe way that the average consumer could not (was not allowed) tospend more than 5000kr (or equivalently consume more than 5000units of v). If we assume that both income and the relative price ofvacationing was unchanged during the pandemic. How much wouldthe average consumer spend on vacationing and on other goods (giventhat she uses all her income)? What would her utility have been? Il-lustrate the consumer's utility maximization problem with and with-out the restriction on travel in a diagram, using the concepts of abudget constraint and indifference curves.(c) Assume that the authorities instead of introducing restrictions hadput a tax on traveling that had reduced the demand for travel to thesame level as the restriction (u = 5000). How high would the price oftravel had been? How high would the tax have been?(d) If instead income had been taxed (and the prices had been un-changed), by how much would the disposable income have to changeso that the consumer would reach the same utility level as with therestrictions in place? Calculate the income change which is equiva-lent to imposing the restriction (we may call this number the "cost"of the pandemic for the average consumer).

Solve only a) part concept of utility function

Answered: (a) Solve the consumer's utility…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

A market economy seems to be able to satisfy customers who have different tastes in cars. Whether you want a big car, small car, red car or blue car, as long as you are willing to pay for it, you can find the car you desire. But with protective services (police), the market doesn’t seem to work as well. If you want lots of police attention, or little police protection, whether you want them to carry guns or not, whether you want them to prevent drug sales or not, none of us seem to be able to get the exact protection services that we are willing to pay for. Using economic reasoning, can you explain why the market can provide for many different tastes in cars, but not for many different tastes in protective services
Suppose now that there is a scrappage scheme which fully reimburses the citizen if she buys the new ULEZ-compliant car. That is, the subsidy is equal to S = 10, 000. What is her utility of buying the new car? What is her utility of keeping the old car? Does the citizen prefer to buy the new car?
Jia is considering whether to go out to dinner at a restaurant with her friend. The meal is expected to cost $40, Jia typically leaves a 20% tip, and an Uber will cost $5 each way. Jia values the restaurant meal at $25. Jia enjoys her friend s company and is willing to pay $30 just to spend an evening with her.
Suppose Jimi has reference dependent preferences over guitars and money as in Tversky and Kahneman (1991). His utility functions are given below. Gains Gains 400 2 -2 -2 Guitars 24 Losses Losses -600 -2 What is the least amount of money Jimi is willing to accept to sell one of his guitars? (just enter a dollar amount, i.e., "1000", not "$1000"
Scenario The government of the island nation of Autarka has become increasingly concerned about the health and wellbeing of low-income households. Medical experts stress the importance of a healthy diet in this regard. They have determined that, ideally, a household would consume at least 10kg of fresh fruit and vegetables each week. The government has proposed implementing a new voucher scheme to ensure that the 10kg per week consumption target is met. Under the government’s proposal, the vouchers would be redeemable for fresh fruit and vegetables, but could not be used for other types of food, or for non-food consumption. Moreover, to limit the cost of the voucher scheme, the value of the vouchers sent to a household would be linked to the household’s income. Community groups in Autarka have expressed concern that a voucher scheme is unnecessarily paternalistic; depriving low-income households of the choice of how to spend their income. These groups argue that the government’s…
Scenario The government of the island nation of Autarka has become increasingly concerned about the health and wellbeing of low-income households. Medical experts stress the importance of a healthy diet in this regard. They have determined that, ideally, a household would consume at least 10kg of fresh fruit and vegetables each week. The government has proposed implementing a new voucher scheme to ensure that the 10kg per week consumption target is met. Under the government’s proposal, the vouchers would be redeemable for fresh fruit and vegetables, but could not be used for other types of food, or for non-food consumption. Moreover, to limit the cost of the voucher scheme, the value of the vouchers sent to a household would be linked to the household’s income. Community groups in Autarka have expressed concern that a voucher scheme is unnecessarily paternalistic; depriving low-income households of the choice of how to spend their income. These groups argue that the government’s…
Problem: Imagine you have two competing athletes who have the option to use an illegal and dangerous drug to enhance their performance (i.e., dope). If neither athlete dopes, then neither gain an advantage. If only one dopes, then that athlete gains a massive advantage over their competitor, reduced by the medical and legal risks of doping (the athletes believe the advantage over their competitor outweighs the risks from doping ). However, if both athletes dope, the advantages cancel out, and only the risks remain, putting them both in a worse position than if neither had been doping. What outcome do we expect from these two athletes? Please use ideas like concepts of monopolies, Oligopolies and Game Theory and Factor markets for this scenario.
Suppose that there are 2 types of plans available to you. Plan A has a deductible of $500, with 10 percent co-insurance rate for many health care services. Plan B has a deductible fo $1000, with 35 percent co-insurance rate. Plan A costs $200 per month in premiums while Plan B costs $80. Discuss characteristics of people who would choose Plan A versus Plan B. Assuming that both plan types exist in the market, who would likely choose Plan B over Plan A? What plan would you choose?
Case No. 1 Emma likes to call her friend regularly during the month, but he lives abroad. A call costs him $5/minute. The psychological benefit (measured in dollars) of the first 100 minutes of call is $10/minute, that of the next 100 minutes, $5/minute, that of the next 100 minutes, $2.5/minute and finally, that of the next 100 minutes, also $2.5/minute. A) If Emma calls her friend 100 minutes a month, does she make a net gain? B) What is the number of call minutes per month that maximizes Emma's satisfaction? C) If we use Emma's monetary measure of satisfaction, what is the amount of her satisfaction? D) What should be the price per minute of a call for Emma to be at the maximum satisfaction by choosing to call 400 minutes per month?
Scenario The government of the island nation of Autarka has become increasingly concerned about the health and wellbeing of low-income households. Medical experts stress the importance of a healthy diet in this regard. They have determined that, ideally, a household would consume at least 10kg of fresh fruit and vegetables each week. The government has proposed implementing a new voucher scheme to ensure that the 10kg per week consumption target is met. Under the government’s proposal, the vouchers would be redeemable for fresh fruit and vegetables, but could not be used for other types of food, or for non-food consumption. Moreover, to limit the cost of the voucher scheme, the value of the vouchers sent to a household would be linked to the household’s income. Community groups in Autarka have expressed concern that a voucher scheme is unnecessarily paternalistic; depriving low-income households of the choice of how to spend their income. These groups argue that the government’s…
People tend to view car travel as being safer than airplane travel, but a person is how many times more likely to die from a car accident than from an airplane crash?
One of the principles of economics is that people respond to incentives. Using this principle, discuss how a tax imposed on people who refuse to get vaccinated against COVID-19 virus affects the national level of vaccination coverage.

Recommended textbooks for you

ENGR.ECONOMIC ANALYSIS

Economics

ISBN:

9780190931919

Author:

NEWNAN

Publisher:

Oxford University Press

Principles of Economics (12th Edition)

Economics

ISBN:

9780134078779

Author:

Karl E. Case, Ray C. Fair, Sharon E. Oster

Publisher:

PEARSON

Engineering Economy (17th Edition)

Economics

ISBN:

9780134870069

Author:

William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

Publisher:

PEARSON

ENGR.ECONOMIC ANALYSIS

Economics

ISBN:

9780190931919

Author:

NEWNAN

Publisher:

Oxford University Press

Principles of Economics (12th Edition)

Economics

ISBN:

9780134078779

Author:

Karl E. Case, Ray C. Fair, Sharon E. Oster

Publisher:

PEARSON

Engineering Economy (17th Edition)

Economics

ISBN:

9780134870069

Author:

William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

Publisher:

PEARSON

Principles of Economics (MindTap Course List)

Economics

ISBN:

9781305585126

Author:

N. Gregory Mankiw

Publisher:

Cengage Learning

Managerial Economics: A Problem Solving Approach

Economics

ISBN:

9781337106665

Author:

Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:

Cengage Learning

Managerial Economics & Business Strategy (Mcgraw-…

Economics

ISBN:

9781259290619

Author:

Michael Baye, Jeff Prince

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS

(a) Solve the consumer's utility maximization problem. How much would she had spent on vacationing and other goods if there had been no pandemic? What would her utility have been?