+1-415-670-9189
info@expertsmind.com
Problem based on utility function
Course:- Macroeconomics
Reference No.:- EM1323




Assignment Help
Assignment Help >> Macroeconomics

Question: In Vancouver the Salvation Army encourages people to make food voucher donations to panhandlers instead of simply giving them cash. You can buy a food voucher for $5 and give it to a panhandler who can use it to purchase food. The Salvation Army says it's a way to ensure that a gift actually goes to food, rather than alcohol or drugs. Suppose a panhandler (PH) consumes two goods: food (F) and drugs (D). The PH has a utility function u = F0D1. This can also be written as u= D. Answer and explain the following using a diagram which is completely labeled.

(a) If drugs and food each cost $1 per unit, and the PH has $20 is cash, how much D and F will he consume.

(b) If instead the PH has $10 in cash and $10 in food vouchers, how much D and F will he consume?

(c) Is the PH better off with $20 in cash, or with $10 in cash and $10 in food vouchers.

 




Ask Question & Get Answers from Experts
Browse some more (Macroeconomics) Materials
As the manager of a restaurant, you decided to estimate the demand equation for your specialty food. After careful statistical analysis,your estimation resulted in the follo
What is the real mortgage interest rate in 2001, 2002, 2003 and 2004, what are the values in 2000 dollars of Nancy's monthly mortgage payments in 2001, 2002, 2003, and 2004?
What value added means is not a higher price for certain goods. Value added means adding value to a raw product at its present stage of production and possibly taking that pro
A consumer has preferences over goods x and y. The utility function is U=sqrtx + sqrty. The marginal utilities are MUx=1/(2sqrtx) and MUy=1/(sqrty). Calculate MRS and determ
What will be the bond new prices if market yields change immediately by +/ - 0.10 percent? What will be the new prices if market yields change immediately by +/ - 2.00 percent
Using the 3-graph model developed in chapter 14, consider first the impact on the demand for loanable funds. If businesses respond as expected to the investment-tax credit,
Political business cycle: Do economic events affect presidential elections? To test this so-called political business cycle theory, Gary Smith 20  obtained the following reg
In a certain year the aggregate value demanded at the existing price level consists of $100 billion of use, $40 billion of investment, $10 billion of net exports, and $20 bill