PROBLEM (3) A consumer has preferences on Amazon original shows (x), and the composite good (y)described as u(x,y) = x'y (HINT: MUx= 2xy and MUy = x²) and she has I = $300 budget in total. Assume py=$1, so we can think of y as the saved dollars in her pocket for other uses. Now, if she is not an amazon prime member,each show costs px = $10, but if she is a prime member, then px(a) Draw her feasible budget set on the x-y axis for the no-prime-membership case, and the prime-membershipcase, separately.%3D$4. Amazon prime membership costs $120.(b) If she chooses not to be a prime member, what is her optimal bundle (x,y) ?(c) If she chooses to become a prime member, what is her optimal bundle (x,y)?(d) What is her optimal utility in (b)?in (c)? Would she want to become a prime member?

Note: "Sorry" since you have posted multiple sub-parts of a question. I will do only first three. If…

PROBLEM (3) A consumer has preferences on Amazon original shows (x), and the composite good (y) described as u(x,y) = x²y (HINT: MUx= 2xy and MUy= x2) and she has I = $300 budget in total. Assume py= $1, so we can think of y as the saved dollars in her pocket for other uses. Now, if she is not an amazon prime member, each show costs px = $10, but if she is a prime member, then px = $4. Amazon prime membership costs $120. (a) Draw her feasible budget set on the x-y axis for the no-prime-membership case, and the prime-membership case, separately. (b) If she chooses not to be a prime member, what is her optimal bundle (x,y) ? (c) If she chooses to become a prime member, what is her optimal bundle (x,y)?

PROBLEM (3) A consumer has preferences on Amazon original shows (x), and the composite good (y) described as u(x,y) = x²y (HINT: MUx= 2xy and MUy= x2) and she has I = $300 budget in total. Assume py= $1, so we can think of y as the saved dollars in her pocket for other uses. Now, if she is not an amazon prime member, each show costs px = $10, but if she is a prime member, then px = $4. Amazon prime membership costs $120. (a) Draw her feasible budget set on the x-y axis for the no-prime-membership case, and the prime-membership case, separately. (b) If she chooses not to be a prime member, what is her optimal bundle (x,y) ? (c) If she chooses to become a prime member, what is her optimal bundle (x,y)?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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