Question
You are an active internet-surfer. You get offered two tariffs for internet access: Tariff A is characterized by a basic fee of 40 and anhourly
You are an active internet-surfer. You get offered two tariffs for internet access: Tariff A is characterized by a basic fee of 40 and anhourly charge for surfing of 60cents. Tariff B has no basic fee, but an hourly charge of 2 for surfing. Your monthly budget is 100 which can be used for internet usage()andother consumptiongoods(). The price for one unit ofis=1. a)Determine the budget constraints for both tariffs and depict them in a suitable diagram b)Assume thatyourpreferencesaredescribedbythefollowingutilityfunction:(,)=. Which tariff will you choose? Explain your results economicallybycompleting your graphic in a). c)How high must the basic fee be to make you feel indifferent between the two tariffs? Agraphical solution is sufficient here
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