Consider a consumer living during a time of civil war. In order to maximise her utility, the consumer can purchase goods by paying cash or by using coupons that the government hands out (also referred to as “rationing"). Suppose you wish to model the consumer's behaviour as a constrained maximisation problem. To simplify matters, you assume that there are only two goods in the economy, x and y, and that the consumer's utility function is given by U (x, y) = xy?. You further assume the price of good x and y in the cash market is 20. However, in the coupon market you assume the price of good r is 40, while the price of good y is 20. You also make the assumption that the consumer has a cash budget of 2000 and a total allotment of coupons of 2400. Last, you assume that the consumer cannot consume negative quantities of goods, so that x 20 and y 20 (the non-negativity constraints).

Consider a consumer living during a time of civil war. In order to maximise her utility, the consumer can purchase goods by paying cash or by using coupons that the government hands out (also referred to as “rationing"). Suppose you wish to model the consumer's behaviour as a constrained maximisation problem. To simplify matters, you assume that there are only two goods in the economy, x and y, and that the consumer's utility function is given by U (x, y) = xy?. You further assume the price of good x and y in the cash market is 20. However, in the coupon market you assume the price of good r is 40, while the price of good y is 20. You also make the assumption that the consumer has a cash budget of 2000 and a total allotment of coupons of 2400. Last, you assume that the consumer cannot consume negative quantities of goods, so that x 20 and y 20 (the non-negativity constraints).

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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