Microeconomics
Microeconomics
10th Edition
ISBN: 9781259655500
Author: David C Colander
Publisher: McGraw-Hill Education
Question
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Chapter 14, Problem 4IP

a)

To determine

The reason for zone pricing adopted by the oil companies.

b)

To determine

Suggestion for the FTC to stop this act and the potential problems with those policies.

c)

To determine

Effect of this policy on overall price of gases.

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Problem 2. If the consumer preference can be represented by a CES function with δ = 0.5, i.e. u(x, y) = x0.5 + y0.5. Let the prices and income be (px, py, w).  1. Set up the Lagrangian expression.2. Take the first-order conditions.3. Substitute into budget constraint to derive the optimal consumption bundles.
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