Problem 2: Satiation point(s) There two goods, candy and soda, available in arbitrary non-negative quan- tities (so the consumption set is R²). A consumer has preferences over con- sumption bundles that are represented by the following utility function: u(x, y) = −|4 — x| − |4 − y| where x is the quantity of candy (in grams), y the quantity of soda (in liters), and |.| denotes the absolute value: for any real number r ≤R, |r| = r -r if r > 0 if r <0 The consumer has wealth of w> 0 Dirhams. The price of candy is p > 0 Dirhams/gram, and the price of soda is q > 0 Dirhams/liter. (a) Calculate the utility of the following consumption bundles: (4,4), (4, 5), (5, 4), (4,3), (3, 4), and a(4, 5) + (1 − a)(3, 4) for a € [0, 1]. (b) In an appropriate diagram, illustrate the consumer's map of indiffer- ence curves. (c) Are the consumer's preferences monotone? Provide an explanation for your answer.

Problem 2: Satiation point(s) There two goods, candy and soda, available in arbitrary non-negative quan- tities (so the consumption set is R²). A consumer has preferences over con- sumption bundles that are represented by the following utility function: u(x, y) = −|4 — x| − |4 − y| where x is the quantity of candy (in grams), y the quantity of soda (in liters), and |.| denotes the absolute value: for any real number r ≤R, |r| = r -r if r > 0 if r <0 The consumer has wealth of w> 0 Dirhams. The price of candy is p > 0 Dirhams/gram, and the price of soda is q > 0 Dirhams/liter. (a) Calculate the utility of the following consumption bundles: (4,4), (4, 5), (5, 4), (4,3), (3, 4), and a(4, 5) + (1 − a)(3, 4) for a € [0, 1]. (b) In an appropriate diagram, illustrate the consumer's map of indiffer- ence curves. (c) Are the consumer's preferences monotone? Provide an explanation for your answer.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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