You have preferences u(x,y) = xy over games (X) and videos (Y) you can buy on a platform and a $360 budget, with prices px = 9 and py = 6. How much would you be willing to pay (at most) as a subscription fee for each of the following plans (you can buy any amount of Y in each plan at the original price, unless otherwise stated): (a) Plan A : You can buy (any amount of) X at a discounted price px = 4 (b) Plan B : You are given 40 units of X for free, but you cannot buy any more of X. (surely can buy any amount of Y) (c) Plan C : You are given 30 units of X for free, but you cannot buy any more of X; you also have a discounted price for good Y; py = 4.
You have preferences u(x,y) = xy over games (X) and videos (Y) you can buy on a platform and a $360 budget, with prices px = 9 and py = 6. How much would you be willing to pay (at most) as a subscription fee for each of the following plans (you can buy any amount of Y in each plan at the original price, unless otherwise stated): (a) Plan A : You can buy (any amount of) X at a discounted price px = 4 (b) Plan B : You are given 40 units of X for free, but you cannot buy any more of X. (surely can buy any amount of Y) (c) Plan C : You are given 30 units of X for free, but you cannot buy any more of X; you also have a discounted price for good Y; py = 4.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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You have preferences u(x,y) = xy over games (X) and videos (Y) you can buy on a platform and a $360 budget, with prices px = 9 and py = 6. How much would you be willing to pay (at most) as a subscription fee for each of the following plans (you can buy any amount of Y in each plan at the original
(a) Plan A : You can buy (any amount of) X at a discounted price px = 4
(b) Plan B : You are given 40 units of X for free, but you cannot buy any more of X. (surely can buy any
amount of Y)
(c) Plan C : You are given 30 units of X for free, but you cannot buy any more of X; you also have a
discounted price for good Y; py = 4.
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