Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Consider an individual who has preferences over Hamburgers (H) and Soda (S) represented by the following utility function: U(H,S)=H 0.9 +3S. The price of a

Consider an individual who has preferences over Hamburgers (H) and Soda (S) represented by the following utility function: U(H,S)=H0.9+3S. The price of a Hamburger is $4 and the price of a Soda is $3. The individual has a budget of B (you don't know the exact amount). You are given the following marginal utilities: MUH=0.9H-0.1, MUS=3.

A)Find the demand functions for this individual.

B)Characterize what will happen over every feasible size of B (ie. zero to infinity). There are multiple cases to consider (Hint: Try to think about what happens to MUH when H=0, then what happens as it increases).

Suppose the individual tells you (assuming they satisfy all standard assumptions made at the consumer level) that they consume 2 sodas. What is their budget?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Business Driven Technology

Authors: Paige Baltzan

8th Edition

1259924920, 978-1259924927

More Books

Students also viewed these Economics questions

Question

3. Im trying to point out what we need to do to make this happen

Answered: 1 week ago