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Laurenlovesreadingbothe-books(E)andpaper-books(P).Herutilityfunctionis given by: U ( E,P )= E + P AssumethatLaurenhas$30tospendonbothtypesofbooksandthatthepriceof e-books, P e , is $2, while the price of paper-books, P p ,
- Laurenlovesreadingbothe-books(E)andpaper-books(P).Herutilityfunctionis given by:
U(E,P)=E+P
AssumethatLaurenhas$30tospendonbothtypesofbooksandthatthepriceof e-books,Pe, is $2, while the price of paper-books,Pp, is $5.
- WhatdoesLauren'sutilityfunctionrevealaboutherwillingnesstosubstitute e-books and paper-books (e.g., are the two goods imperfect substitutes, perfect substitutes, orperfectcomplements).DrawaplotofLauren'sindifferencecurves with paper-books (P) on the vertical axis.
- What is the equation for Lauren's budget line?Draw it (with P on the vertical axis), and label the slope and intercepts.
- Inathirdplot,combineLauren'sbudgetconstraintwithherindifferencecurves to find her utility maximizing bundle of e-books and paper-books.Interpret your answer.
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Auditing Cases An Active Learning Approach
Authors: Mark S. Beasley, Frank A. Buckless, Steven M. Glover, Douglas F. Prawitt
2nd Edition
0130674842, 978-0130674845
