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netion, u. (*1, 2, h) = Axfr - h² and hiu the mumber cof hour

netion, u. (*1, 2, h) = Axfr - h² and hiu the mumber cof hour

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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1. Hailey lives in city A and consumes two goods, 1 and 2, with the following utility function, 1 u. (21, 23, h) = Ar{a - where A > 0 is a constant and h is the number of hours to work. The goods prices in city A are pf and p, and the wage rate wa.
Transcribed Image Text:1. Hailey lives in city A and consumes two goods, 1 and 2, with the following utility function, 1 u. (21, 23, h) = Ar{a - where A > 0 is a constant and h is the number of hours to work. The goods prices in city A are pf and p, and the wage rate wa.
(d) O Now a new opportunity shows up in city B and Hailey considers moving from A to B. Suppose Hailey's utility of living in city B is given by 1 us (21, #2, h) = Ar¡ n} - where h, is taken as given and is the same as the optimal choice of h for city A. All goods prices and the wage rate in city B are the same as those in city A. Derive the Marshallian demand functions given h., without using the Lagrangean method. Compare the maximized utilities in the two cities and answer: Should (e) Hailey move to B? [Hint: This part need not involve a lot of math. Try to study your answers in the previous parts carefully and find a simple way to answer this.)
Transcribed Image Text:(d) O Now a new opportunity shows up in city B and Hailey considers moving from A to B. Suppose Hailey's utility of living in city B is given by 1 us (21, #2, h) = Ar¡ n} - where h, is taken as given and is the same as the optimal choice of h for city A. All goods prices and the wage rate in city B are the same as those in city A. Derive the Marshallian demand functions given h., without using the Lagrangean method. Compare the maximized utilities in the two cities and answer: Should (e) Hailey move to B? [Hint: This part need not involve a lot of math. Try to study your answers in the previous parts carefully and find a simple way to answer this.)
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