Amy is a chocolate lover and has a total of 50 dollars to spend this week. The price of a certain brand chocolate is p dollars per box. Amy's preferences for buying q boxes of chocolate and leaving a nonnegative amount (50 - pg) in her bank account, are represented by the utility function: U(g) = v7 + V50 - pq. qE (1) Find the first-order condition for a utility-maximising quantity of chocolate box. (2) Solve the first-order condition derived in (1) in order to express the utility-maximising quantity q" as a function of p. (3) What condition will guarantee that your quantity q is really a maximum? (4) Express the elasticity of demand for chocolate as a function of the price p per box. When the price is 5 dollars per box, calculate the price elasticity of Amy's demand for
Amy is a chocolate lover and has a total of 50 dollars to spend this week. The price of a certain brand chocolate is p dollars per box. Amy's preferences for buying q boxes of chocolate and leaving a nonnegative amount (50 - pg) in her bank account, are represented by the utility function: U(g) = v7 + V50 - pq. qE (1) Find the first-order condition for a utility-maximising quantity of chocolate box. (2) Solve the first-order condition derived in (1) in order to express the utility-maximising quantity q" as a function of p. (3) What condition will guarantee that your quantity q is really a maximum? (4) Express the elasticity of demand for chocolate as a function of the price p per box. When the price is 5 dollars per box, calculate the price elasticity of Amy's demand for
Chapter10: Consumer Choice Theory
Section: Chapter Questions
Problem 6P
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![Question 6
Amy is a chocolate lover and has a total of 50 dollars to spend this week. The price of
a certain brand chocolate is p dollars per box. Amy's preferences for buying q boxes
of chocolate and leaving a nonnegative amount (50 – pg) in her bank account, are
represented by the utility function:
50
U(g) = va + V50 – pg. q€
(1) Find the first-order condition for a utility-maximising quantity of chocolate box.
(2) Solve the first-order condition derived in (1) in order to express the utility-maximising
quantity q* as a function of p.
(3) What condition will guarantee that your quantity q* is really a maximum?
(4) Express the elasticity of demand for chocolate as a function of the price p per box.
When the price is 5 dollars per box, calculate the price elasticity of Amy's demand for
chocolate.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F73e1a1ed-6030-4ca6-97d0-b9031a895ac2%2F057dc04e-f13c-44f9-9d82-638c601fc581%2Fjb9yil_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Question 6
Amy is a chocolate lover and has a total of 50 dollars to spend this week. The price of
a certain brand chocolate is p dollars per box. Amy's preferences for buying q boxes
of chocolate and leaving a nonnegative amount (50 – pg) in her bank account, are
represented by the utility function:
50
U(g) = va + V50 – pg. q€
(1) Find the first-order condition for a utility-maximising quantity of chocolate box.
(2) Solve the first-order condition derived in (1) in order to express the utility-maximising
quantity q* as a function of p.
(3) What condition will guarantee that your quantity q* is really a maximum?
(4) Express the elasticity of demand for chocolate as a function of the price p per box.
When the price is 5 dollars per box, calculate the price elasticity of Amy's demand for
chocolate.
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