Question
Consider three households earning an after-tax income of $5,000 per month. Each family has preferences that take the following form: Family A: = 0.3 ln()
Consider three households earning an after-tax income of $5,000 per month. Each family has preferences that take the following form:
Family A: = 0.3 ln() + 0.7 ln()
Family B: = 0.5 ln() + 0.5 ln()
Family C: = 0.8 ln() + 0.2 ln()
where U denotes utility, I is internet connection speed measured in Mbps and G refers to any other good/service that the family buys. The price of I is $10 and the price of G is $100. Each family has to decide how to allocate their budget between goods I and G.
a) Which family cares about internet connection speed the most?
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