When Katerina goes running, she can either take water (W) or coconut water (C) with her to drink. She believes coconut water is three time more hydrating than plain water. Katerina just cares about the hydrating power of the drink. (i) Can Katerina's utility function be represented by U(W,C) =3C + W? (ii) Given U(W,C) =3C + W, Katerina has £28 pounds to spend on these two drinks. If a bottle of water costs £1 and a bottle of coconut water costs £2 what is Katerina's optimal choice? Note that MUw = 1 and MUc=3. %3D (iii) Explain under which conditions the tangency condition does not work. Given that the tangency condition does not work, discuss how we can find out the optimal consumption bundle for a consumer.

When Katerina goes running, she can either take water (W) or coconut water (C) with her to drink. She believes coconut water is three time more hydrating than plain water. Katerina just cares about the hydrating power of the drink. (i) Can Katerina's utility function be represented by U(W,C) =3C + W? (ii) Given U(W,C) =3C + W, Katerina has £28 pounds to spend on these two drinks. If a bottle of water costs £1 and a bottle of coconut water costs £2 what is Katerina's optimal choice? Note that MUw = 1 and MUc=3. %3D (iii) Explain under which conditions the tangency condition does not work. Given that the tangency condition does not work, discuss how we can find out the optimal consumption bundle for a consumer.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

image attached
Please help me to solve questions (a) (b) (e). (especially question e). thank you!
Suppose Jimi has reference dependent preferences over guitars and money as in Tversky and Kahneman (1991). His utility functions are given below. Gains Gains 400 2 -2 -2 Guitars 24 Losses Losses -600 -2 What is the least amount of money Jimi is willing to accept to sell one of his guitars? (just enter a dollar amount, i.e., "1000", not "$1000"
Given the following utility functions, check if the utility function is homogeneous and if MRS is diminishing: (1) U(x, y) = Vr + y (2) U(x,y) = (x +y")/5.851
If the utility function (U) between food (F) and clothing (C) can be represented as U = F*C, then which combination of food and clothing will a rational consumer choose? a. (F, C) = (9, 25) O b. (F, C) = (25, 4) O c. (F, C) = (4, 16) d. (F, C) = (4, 25)
A consumer with $120 income and the utility function u(x,y) = (x^2)y where x is food and y clothing can go for shopping in one of the two stores A or B, where the prices for food and clothing are respectively pAx = 1, PAy = 80 and PBx = 8, PBy = 1. (a) If she can visit only one of the stores, which one would she go and what would be her optimal bundle there? Could she afford this very bundle at the other store? (HINT: How happy would she be if she chooses to go to store A for shopping? To store B? Which one is higher and what bundle would she buy there?) (b) If she can freely visit both stores (so that she buys each good from the store where it is sold cheaper), what would be her optimal bundle? What would she buy from each store? (c) How much money would she be willing to give up (out of her $120 budget) for the ability to visit both stores as in (b) rather than being restricted to shopping in only one store (the one she chooses in (a)? (HINT: suppose she pays $A for this privilege.…
A, B, C
Please use Kuhn Tucker 5. A consumer's utility function is: u(x) = x1+ /®2 (c) Verify the properties of the indirect utility function. (d) Calculate the expenditure function and verify its properties.