Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please answer the attached question 4. (25 points) A student has two sources of expenses: living and consump- tion. If the student lives in an

Please answer the attached question

image text in transcribed
4. (25 points) A student has two sources of expenses: living and consump- tion. If the student lives in an apartment with s square metres and con- sumes c consumables, then they receive utility u (s, c) = secs . The student chooses apartment size and consumption amount to get the highest utility. Total living expenses are 1000 - rs. Each unit of consump- tion costs 1. The student spends exactly 1800. a) (4 points) Building restrictions require apartments to be at least 20 square metres but no more than 120 square metres. Formally write the constrained optimisation problem. b) (16 points) List all cases that will occur from complementary slack- ness, with the implied equations and checks for each case. c) (3 points) Under what conditions will the student live in a 20m- apart- ment? A 120m2 apartment? An apartment between 20m and 120m?? d) (2 point) Now suppose each unit of consumption costs 2 (instead of 1). Everything else stays the same. Without solving the problem again, use the envelope theorem to approximate change in utility

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

How China Became Capitalist

Authors: Ronald Coase, Ning Wang

1st Edition

1137351438, 9781137351432

More Books

Students also viewed these Economics questions