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Econ 201 (Fall 2022) 4. (Total: 12 points) Nakotah is a computer programmer currently living in Butter Suppose she consumes two goods: Internet Services q1
Econ 201 (Fall 2022) 4. (Total: 12 points) Nakotah is a computer programmer currently living in Butter Suppose she consumes two goods: Internet Services q1 and Russet Gold Potatoes qp. Nakotah is paid $1,600 a month for her computer skills. Her internet service sells access to 1 T for $50 (i.e. P1 = $50) and bags of potatoes cost $8 each (i.e. Pp = $8). Suppose we estimate Nakotah's utility as: U(91, qp) = 5Vq1 +2vqp (a) (2 points) Would Nakotah ever want to consume 0 units of internet service or potatoes assuming Y > 0, PI > 0, and Pp > 0? (6 points) Find Nakotah's Hicksian Demand for internet service and potatoes (note: as you will be asked to use this later, keep your answer as a function of U, PI, and Pp). What is her expenditure function?Bcon () (2 points) Her optimal bundle of goods (based on her Marshallian demand) is (q1,9;) = (16, 100) given Y = $1, 600, P, = $50, and Pp = $8. Use your answer from part (b) to show you get the same optimal bundle based on the Hicksian Demand curves. (d) (2 points) Suppose Nakotah has been asked to move to Seattle, WA by her company. The price of internet service is PI = $75 and the price of potatoes is Pp = $18. What is the value of the compensating variation given her original income was Y = $1,600
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