Question
In an economy there are four different groups of people who can spend their money per month between gallons of fuel (Y) or buying clothes
In an economy there are four different groups of people who can spend their money per month between gallons of fuel (Y) or buying clothes (X).
The first group has a utility function U=(X^0.2)(Y^0.3) and a budget of $340,000 per month. The second group has a utility function U=(X^0.5)(Y^0.4) and a budget of $560,000 per month. The third group has a utility function U=(X^0.9)(Y^0.4) and a budget of $4,500,000 per month. And the fourth group has a utility function U=(X^0.3)(Y^0.7) and a budget of $5,200,000 per month.
a) With the above, determine and graph the optimal consumption, the individual demands and the market demand assuming that the prices of clothing are on average $60,000 and that the prices per gallon of fuel are:
P y = {15,000; 37,000; 67,000; 150,000; 500,000}
(Individual demands and market demand can be plotted on the same Cartesian plane)
b) What happens if a natural disaster occurs that requires fuel rationing to 5 gallons of fuel
The fuel is used for transportation, heating and food preparation in each group
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