Jasper utility function for beer and pizza can be expressed as: U(B,P) = BXP Suppose beer costs $5 per glass, pizzas cost $10 each, and Jasper has a total of $30 to spend. Assume Jaspeer is allowed to purchase fractional amounts of each good. Part A) Based on the above information, what is Jaspeer's optimal amount of beer? Enter the number below. Beer 3 glasses Part B) Now suppose the price of beer falls from $5 down to $3. Calculate the following and fill in the blanks below. When necessary, round answers to two places after the decimal. (Hint: find the decomposition basket to calculate the substitution and income effects). Jasper's total effect on beer is to increase total consumption by glasses of beer. Jasper's substitution effect is to increase beer consumption by 0.28 Jasper's income effect is to increase beer by 1.12 glasses of beer. glasses of beer.

Jasper utility function for beer and pizza can be expressed as: U(B,P) = BXP Suppose beer costs $5 per glass, pizzas cost $10 each, and Jasper has a total of $30 to spend. Assume Jaspeer is allowed to purchase fractional amounts of each good. Part A) Based on the above information, what is Jaspeer's optimal amount of beer? Enter the number below. Beer 3 glasses Part B) Now suppose the price of beer falls from $5 down to $3. Calculate the following and fill in the blanks below. When necessary, round answers to two places after the decimal. (Hint: find the decomposition basket to calculate the substitution and income effects). Jasper's total effect on beer is to increase total consumption by glasses of beer. Jasper's substitution effect is to increase beer consumption by 0.28 Jasper's income effect is to increase beer by 1.12 glasses of beer. glasses of beer.

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

Jasper utility function for beer and pizza can be expressed as:
U(B,P) = BXP
Suppose beer costs $5 per glass, pizzas cost $10 each, and Jasper has a total of $30 to spend. Assume Jaspeer is allowed to purchase fractional amounts
of each good.
Part A) Based on the above information, what is Jaspeer's optimal amount of beer? Enter the number below.
glasses
Beer = 3
Part B) Now suppose the price of beer falls from $5 down to $3. Calculate the following and fill in the blanks below. When necessary, round answers
to two places after the decimal. (Hint: find the decomposition basket to calculate the substitution and income effects).
Jasper's total effect on beer is to increase total consumption by
glasses of beer.
Jasper's substitution effect is to increase beer consumption by 0.28
Jasper's income effect is to increase beer by 1.12
glasses of beer.
glasses of beer.

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