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Andrea has a budget of £21 to spend on toothbrushes and tooth paste. He does not receive any utility from owning a toothbrush, but for the consumption of every tube of tooth paste he gains a utility of 2 utils – but only if he owns a tooth brush. Without a tooth brush, Andrea gains no utility from consuming tooth paste. In addition, after consuming 10 tubes of tooth paste, a toothbrush needs to be replaced, i.e., Andrea needs to buy a new one. The current price of tooth brushes on the market is £5 and the current price for tooth paste is £1 per tube. Assume that Andrea aims to maximise
Why in this question is consumer surplus equal to the utility gained from consumption?
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- Joe is currently in consumer equilibrium by consuming cheese and crackers, such that the last cracker consumed yielded 8 utils and the last piece of cheese consumed yielded 12 utils. Assume the price of crackers is two cents per cracker and the price of cheese is three cents per piece. If the price of crackers increases to four cents, Joe should his consumption of crackers and his marginal utility from crackers will and also his consumption of cheese and his marginal utility from cheese will (Assume he is in the downward sloping portion of the MU curve.) Ο Ο Ο decrease; increase; increase; decrease increase; increase; increase; increase increase; decrease; increase; decrease increase; increase; decrease; decreasePaolo enjoys consuming both soda and coffee. Each can of soda costs Ps = $1, and each cup of coffee costs Pc = $2. Suppose that Paolo buys 75 cans of soda and 50 cups of coffee per month. The following graphs show his marginal utility curves for soda and coffee. At his current consumption level, Paolo's marginal utility from consuming the last can of soda he bought is MUS = 12 utils per can, and his marginal utility from consuming the last cup of coffee he bought is MUC = 12 utils per cup. 24 20 20 16 25 50 75 100 125 150 25 50 75 100 125 150 SODA (Cans) COFFEE (Cups) Is Paolo currently maximizing his utility? O No; he likes coffee and soda more than other goods, so he should buy more of both. O No; he could buy less soda and more coffee, not spend any more money, and be better off. O Yes; the marginal utility he receives from his last can of soda equals that of his last cup of coffee. O No; he could buy more soda and less coffee, not spend any more money, and be better off. MU OF SODA…Tony is throwing a party at his Fraternity and is trying to choose what booze to buy. A bottle of vodka has three times the alcohol as a six-pack of beer. Assume that Tony only cares about the total amount of alcohol in his basket. (use vodka on the X-axis and beer measured in six-pack on the Y-axis) a) Devise a utility function to represent these preferences. b) Suppose a bottle of vodka costs $40, a six-pack of beer costs $10, and the budget is $200. Write the budget constraint. c) Solve Tony’s utility maximization problem and find the optimal combination. d) Suppose that a bottle of vodka cost has increased to $50. What will be his new optimal combination.
- Jackie has a budget of $36 per month to spend on snacks. She can spend this budget on bags of potato chips (C) and Hershey chocolate bars (H). Potato chips cost $4 per bag, while Hershey bars cost $1 per bar. The utility that Jackie receives from consuming potato chips and Hershey bars is represented by the following utility function: U=3C2 H. Given that Jackie seeks to maximize her utility, find the number of potato chip bags and Hershey chocolate bars that Jackie will purchase each month.Bags of potato chips Total utility Candy bars Quantity Total utility Quantity 1 10 1 8 2 16 2 14 3 18 3 18 4 19 4 21 20 23 Liz consumes two goods, candy bars and potato chips. Her budget is $4 per day. The price of a candy bar is $1.00 and the price of a bag of chips is 50 cents. Her utility is in the table above. For Liz to maximize her utility, what combination of candy bars and potato chips should she eat? O A. 2 candy bars and 4 bags of potato chips O B. 4 candy bars and 0 bags of potato chips OC. 1 candy bar and 5 bags of potato chips O D. 3 candy bars and 2 bags of potato chips O E. None of the above answers are correct.Alexi has a budget of $21 to spend on toaster and breads. He does not directly gain any utility from owining a toaster but for every slice of toasted bread he consumes he gain 2 units of utility, that is if he owns a toaster. Without the toaster, he gain 0 units of utility from consuming plain bread. Suppose the toaster has inferior quality and will break after toasting only 10 slices, then Alexi needs to buy a new one. The current market price for cheap toaster is $5 and the price for a single slice of bread is $1. Assume that Alexi aims to maximize consumer surplus. Find Alexi's income-consumption curve for slices of bread for incomes between $0 and $21, assuming a price of $1 per slice.
- Larry and Teri allocate their consumption between two goods: hats and bats. The price of hats is €5 each, and the price of bats is €10 each. For Larry, the marginal utility of the last hat consumed was 8, and the marginal utility of the last bat was 24. For Teri, the marginal utility of the last hat was 6, and the marginal utility of the last bat was 12. Which consumer is not maximizing his/her utility? How can you tell? How should he/she change their allocation?1. Suppose you are considering to make a decent holiday dinner. In this year, to be creative, you are thinking to put Copper River Salmon from Alaska (fillet) and fresh Atlantic Lobsters from Maine as entrée on the table. Use the information given, to finish the questions below. (1) The table following provides you total utility (U) and marginal (MU) from consuming Salmon and Lobster. Suppose your total utility of Salmon consumption (U1) is a function of the units (Q as pound or lbs.) of salmon consumed, as U1 =. =/400Q. Similarly, your total utility of Lobster (U2) has the form as units (Q as lbs.) of lobster consumed, which is U2 = /36Q + 40. Now fill the empty spots in the table using the information given. Total utility and marginal utility of Salmon and Lobster. Copper River Salmon Atlantic Lobster Q (Ibs.) U1 MU1 U2 MU2 1 20.00 20.00 8.72 8.72 2 3 4. 6. 7 8 10 (2) With a certain amount of budget, you are going to purchase both Salmon and Lobsters. To maximize your total…Elizabeth makes $200 a week at het summer job and spends her entire weekly income on new running shoes and jeans, since these are only two items that provide utility to her. Furthermore,Elizabeth insists that for every pair of jeans she buys, she must also buy a pair of shoes. (without the shoes, the new jeans are worthless). Therefore, she buys the same number of pairs of shoes and jeans in any given week. a) If jeans cost $20 and shoes cost $20 , how many will Elizabeth buy of each?b) Suppose that the price of jeans rises to $30a pair , how many shoes and jeans will she buy?c) To what effect (income or substitution) do you attribute the change in utility levels between part a and part b
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