Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Mickey is considering buying a tape recorder. His utility function is U ( x , y , z ) = x + f ( y

Mickey is considering buying a tape recorder. His utility function is U(x, y, z) = x + f(y)z.5, where x is the amount of money he spends on other goods, y is the number of tape recorders he buys, and z is the number of tapes he buys. Let f(y) = 0 if y < 1 and f(y) = 8 if y is greater than or equal to 1. The price of tape recorders is $20, the price of tapes is $1, and Mickey can easily afford to buy a tape recorder and several tapes. Will he buy a tape recorder?

Why is the answer he should not buy a tape recorder?

Can you please show the workings?

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

Step: 3

blur-text-image

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

Advanced Placement Economics Microeconomics

Authors: Gary L. Stone

4th Edition

1561836699, 978-1561836697

More Books

Students also viewed these Economics questions