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Suppose that the utility function of an enterprise consumer for coal (C) and natural gas (G) is given by U(C,G) = a In(C) +
Suppose that the utility function of an enterprise consumer for coal (C) and natural gas (G) is given by U(C,G) = a In(C) + (1 - a) In (G) where 0 < a < 1. Suppose the prices of coal and gas are $2 and $4 respectively and the enterprise consumer has a yearly energy budget of $100000. Suppose in addition that the government has chosen to ration coal because of climate concerns by allowing a maximum consumption of 25000 units (C25000). If a = 0.2, find the optimal consumption bundle of coal and gas. Does the coal rationing constraint influence consumer's choice and utility, and if so, how much? b. a. If a = 0.8, find the optimal consumption bundle. Does coal rationing constraint influence consumer's choice and utility, and if so, how much?
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a If a 02 then the optimal consumption bundle of coal and gas is C 25000 G 8333333 The co...Get Instant Access to Expert-Tailored Solutions
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