Matthew has the following utility over bundles (x₁,x₂): U(x₁, x₂) = 4₁√√x₁ + x₂. The prices in the market are p₁= $4 and p₁ = $2. His income is $y. Consider the following three statements: (1) If y = 8, the optimal bundle for Bob is x₁ = 1 and x*₂ = 2. 1 2 (2) If y = 3, Bob will buy only from x, and not from x₂. (3) No matter what his income is, if it exceeds $4, Bob will buy only 1 unit of x₁. a) only (1) is correct. b) only (1) and (2) are correct. c) only (1) and (3) are correct. Od) All three statements are correct. e) None of the above.

Matthew has the following utility over bundles (x₁,x₂): U(x₁, x₂) = 4₁√√x₁ + x₂. The prices in the market are p₁= $4 and p₁ = $2. His income is $y. Consider the following three statements: (1) If y = 8, the optimal bundle for Bob is x₁ = 1 and x*₂ = 2. 1 2 (2) If y = 3, Bob will buy only from x, and not from x₂. (3) No matter what his income is, if it exceeds $4, Bob will buy only 1 unit of x₁. a) only (1) is correct. b) only (1) and (2) are correct. c) only (1) and (3) are correct. Od) All three statements are correct. e) None of the above.

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

Matthew has the following utility over bundles (x₁,x₂): U(x₁, x₂) = 4₁√√x₁ + x₂. The prices in
the market are p₁ = $4 and P₂ = $2. His income is $y. Consider the following three
statements:
(1) If y=8, the optimal bundle for Bob is x₁= 1 and x*₂ = 2.
1
2
(2) If y = 3, Bob will buy only from x, and not from 1 X₂.
(3) No matter what his income is, if it exceeds $4, Bob will buy only 1 unit of x₁.
O a) only (1) is correct.
b) only (1) and (2) are correct.
c) only (1) and (3) are correct.
d) All three statements are correct.
e) None of the above.
Z

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