Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The Randolph family likes nice dinners, but they are not crazy about preparing meals (or washing dishes). Their prandial utility function is U(h, t, r)

image text in transcribed
image text in transcribed
The Randolph family likes nice dinners, but they are not crazy about preparing meals (or washing dishes). Their prandial utility function is U(h, t, r) = 20h0.10.3 0.4 where h, t and r are the number of home-cooked dinners, takeout dinners and restaurant dinners, respectively, that the Randolphs consume in a month. The (average) prices of these dinners are ph = $10 (for home-cooked), pr = $25 (for takeout) and p, = $50 (for restaurant). a. (2 pts) Write down the Lagrangian for the Randolph's utility maximization problem given that their monthly dinner budget is B=$800. b. (5 pts) Find the numbers of home-cooked, take-out and restaurant dinners that the Randolphs should consume per month to maximize their prandial utility (given their budget constraint), and find their maximum utility. c. (3 pts) Assuming that the prices and the utility function do not change, by approximately how much will the Randolphs need to increase their monthly dinner budget if they want to increase their prandial utility by 1 util (from the value you found in b.)

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

Research Design Qualitative Quantitative And Mixed Methods Approaches

Authors: John W. Creswell, J. David Creswell

5th Edition

1506386709, 9781506386706

More Books

Students also viewed these Economics questions

Question

what explained variation really means

Answered: 1 week ago

Question

The fear of making a fool of oneself

Answered: 1 week ago

Question

Annoyance about a statement that has been made by somebody

Answered: 1 week ago