Blana is the manager of a local bank branch in College Station where he consumes bundles of two commodities x and y. Prices in College Station are p-1 and py=5. They are offered a transfer to Dallas where prices are py-2 and py-8; Diana is guaranteed a salary in Dallas with which they would be able to buy exactly what they buy in College Station. Diana's utility function is U(x.y)-x+y and their income in College Station is $5000. What happens to Diana's utility if they accept the change? O Increases 15% O Does not change O Increases 4% O Increases by 2100/8% O Increases 10%

Blana is the manager of a local bank branch in College Station where he consumes bundles of two commodities x and y. Prices in College Station are p-1 and py=5. They are offered a transfer to Dallas where prices are py-2 and py-8; Diana is guaranteed a salary in Dallas with which they would be able to buy exactly what they buy in College Station. Diana's utility function is U(x.y)-x+y and their income in College Station is $5000. What happens to Diana's utility if they accept the change? O Increases 15% O Does not change O Increases 4% O Increases by 2100/8% O Increases 10%

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Form Utility

The term utility in general refers to the satisfaction earned from usage of a particular product or service. Utility always plays an important role because it influences various important elements like demand & thereby the price of the good or service as well. Though utility is not easy to measure, various types of economic models can be used indirectly. There can be various types of utilities like economic utility, marginal utility, cardinal utility, form utility.

Question

Dlana is the manager of a local bank branch in College Station where he consumes bundles of two commodities x and y. Prices
in College Station are px-1 and py=5. They are offered a transfer to Dallas where prices are py-2 and py-8; Diana is guaranteed
a salary in Dallas with which they would be able to buy exactly what they buy in College Station. Diana's utility function is
U(x.y)-x+y and their income in College Station is $5000. What happens to Diana's utility if they accept the change?
O Increases 15%
O Does not change
O Increases 4%
O Increases by 2'100/8%
O Increases 10%

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