Andrea has a budget of £21 to spend on toothbrushes and tooth paste. He does not receive any utility from owning a toothbrush, but for the consumption of every tube of tooth paste he gains a utility of 2 utils - but only if he owns a tooth brush. Without a tooth brush, Andrea gains no utility from consuming tooth paste. In addition, after consuming 10 tubes of tooth paste, a toothbrush needs to be replaced, i.e., Andrea needs to buy a new one. The current price of tooth brushes on the market is £5 and the current price for tooth paste is £1 per tube. Assume that Andrea aims to maximise consumer surplus. a) In a graph, draw total utility as a function of number of toothpaste tubes, assuming that Andrea buys 1 tooth brush. b) How many tubes will Andrea buy if he wants to maximise consumer surplus, assuming that Andrea can buy any amount of tooth brushes? What is Andrea's total consumer surplus? c) How many tubes will he buy if the current price is £0.50 per tube?

Andrea has a budget of £21 to spend on toothbrushes and tooth paste. He does not receive any utility from owning a toothbrush, but for the consumption of every tube of tooth paste he gains a utility of 2 utils - but only if he owns a tooth brush. Without a tooth brush, Andrea gains no utility from consuming tooth paste. In addition, after consuming 10 tubes of tooth paste, a toothbrush needs to be replaced, i.e., Andrea needs to buy a new one. The current price of tooth brushes on the market is £5 and the current price for tooth paste is £1 per tube. Assume that Andrea aims to maximise consumer surplus. a) In a graph, draw total utility as a function of number of toothpaste tubes, assuming that Andrea buys 1 tooth brush. b) How many tubes will Andrea buy if he wants to maximise consumer surplus, assuming that Andrea can buy any amount of tooth brushes? What is Andrea's total consumer surplus? c) How many tubes will he buy if the current price is £0.50 per tube?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Andrea has a budget of £21 to spend on toothbrushes and tooth paste. He does not
receive any utility from owning a toothbrush, but for the consumption of every tube of
tooth paste he gains a utility of 2 utils – but only if he owns a tooth brush. Without a
tooth brush, Andrea gains no utility from consuming tooth paste. In addition, after
consuming 10 tubes of tooth paste, a toothbrush needs to be replaced, i.e., Andrea
needs to buy a new one. The current price of tooth brushes on the market is £5 and
the current price for tooth paste is £1 per tube. Assume that Andrea aims to maximise
consumer surplus.
a) In a graph, draw total utility as a function of number of toothpaste tubes,
assuming that Andrea buys 1 tooth brush.
b) How many tubes will Andrea buy if he wants to maximise consumer surplus,
assuming that Andrea can buy any amount of tooth brushes? What is Andrea's
total consumer surplus?
c) How many tubes will he buy if the current price is £0.50 per tube?
d) Find Andrea's income-consumption curve for tooth paste tubes for incomes
between £0 and £21, assuming a price of £1 per tube.

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