Cities often impose water use restrictions on consumers

Assignment Help Business Economics

Reference no: EM13887757

During droughts, cities often impose water use restrictions on consumers. Suppose Rusalka has preferences for Water (W) and other goods (X) given by the utility function: U(W, X) = WX. Suppose the price of other goods is $1 and the price of water is 25¢. Rusalka has a budget of $50/week.

a. How much water will Rusalka purchase each week? Show how you determined your answer. Note: you do not need to use the Lagrangian method unless you want to.

b. Suppose the government imposes a quota limiting water use to a maximum of 40 units/week. Calculate the effect the quota has on Rusalka's utility. If you are unable to determine this numerically, show it graphically for partial credit.

c. What is the dollar equivalent value of the quota’s impact on Rusalka? If you are unable to determine this numerically, show it graphically for partial credit.

Reference no: EM13887757

Questions Cloud

Federal laws and regulations have on international business : What impact do Federal laws and regulations have on international business? Name at least 3 different types of laws that affect international businesses (Cite country/product examples where appropriate)

Two firms identical production costs : Two firm’s identical production costs, how do they maximize profits, how does this change if price discrimination is feasible or if the two firms have different costs of productions?

Single amount value the dealer receives at the end of loan : You owe $350 a month on a 5 year car loan financed at %6 per month compounded monthly. What is the single amount value the dealer receives at the end of the loan?

Equivalent variation of your companys compensation plan : Assume that in your first job after graduating from college you live in a city where the price of food is PF and the price of housing is PH. You consume F1 of food and H1 of housing per year. Using both your graph and a written explanation describe h..

Cities often impose water use restrictions on consumers : During droughts, cities often impose water use restrictions on consumers. Suppose Rusalka has preferences for Water (W) and other goods (X) given by the utility function: U(W, X) = WX. Suppose the government imposes a quota limiting water use to a ma..

Utility function-club devoted to the consumption of good : Sam’s utility function is U(x1, x2) = 2x1 + x2, where x1 is the number of units of good 1 he consumes per week and x2 is the number of units of good 2 he consumes per week. Sam has $200 a week to spend.If he belonged to the club, he could buy good 2 ..

What is your optimal consumption bundle : You live in a world with two time periods. Your income is $100 in time period 1 and $150 in period 2. If the interest rate is 0.03 (3%), draw your inter temporal budget constraint. Now suppose current and future consumption are perfect complements yo..

Consider the case of gold standard economy : Consider the case of a gold standard economy, What effect would you expect an increase in the price of gold to have on the level of domestic real GDP, and why? What effect would you expect the change in real GDP to have on net exports?

Deal a nearby nuclear power plant is condemned : If I spent all my money ($450,000) on a new house I could buy a house with 4500 square feet. I settle for a 1500 square foot house. (Each square foot costs the same.) The day after I close the deal a nearby nuclear power plant is condemned and the va..

User Account

All Pages