Eren’s two main hobbies are taking vacations overseas (V) and eating expensive meals (M). His utility function is given as: U(V,M) = V^2M Last year, the average price of taking a vacation overseas was US$200 and the average price of an expensive meal is $50. However, due to supply problems in Onions, the average price of an expensive meal rose to $75. The average price of a vacation did not change. His income, which is $1500, did not change. Calculate the change in consumer surplus from consuming the expensive meals considering the price
Eren’s two main hobbies are taking vacations overseas (V) and eating expensive meals (M). His utility function is given as: U(V,M) = V^2M Last year, the average price of taking a vacation overseas was US$200 and the average price of an expensive meal is $50. However, due to supply problems in Onions, the average price of an expensive meal rose to $75. The average price of a vacation did not change. His income, which is $1500, did not change. Calculate the change in consumer surplus from consuming the expensive meals considering the price
Advanced Engineering Mathematics
10th Edition
ISBN:9780470458365
Author:Erwin Kreyszig
Publisher:Erwin Kreyszig
Chapter2: Second-order Linear Odes
Section: Chapter Questions
Problem 1RQ
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Eren’s two main hobbies are taking vacations overseas (V) and eating expensive
meals (M). His utility function is given as: U(V,M) = V^2M
Last year, the average price of taking a vacation overseas was US$200 and the average
price of an expensive meal is $50. However, due to supply problems in Onions, the
average price of an expensive meal rose to $75. The average price of a vacation did not
change. His income, which is $1500, did not change.
Calculate the change in consumer surplus from consuming the expensive
meals considering the price change (Hint: you need to compare his optimal
consumption bundle before and after the price change to get the change in CS).
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