+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
All of the firms will submit sealed bids. The procurement officer will look at all of the bids and select the lowest bid but pay to the lowest bidder a price equal to the pr
A price change causes the quantity demanded of a good to decrease by 30 percent , while the total revenue of that good increases by 15 percent. Is the demand curve elastic or
The economy has 1000 units of capital and a laor force of 1000 workers. a). Derive the equation describing labor demand in this economy as a function of the real wage and capi
Utilizing the Solow Growth Model describe long-run growth in an economy. Explain why an economy should strive to reach its golden rule steady state level.
What is the percentage of this problem a country has a population of 2,130,819, and another country's has a population of 11,862,740 what is the percentage when you compare th
What are primarily intended to address the problem of insuring people who do not have health insurance? Would a public national health insurance system reduce total spending o
If there are 150 million people in the labor force and 10 million of them do not have jobs but have looked for work in the last month what is the unemployment rate? 2)If nex
Suppose that an economy initially at full-employment is hit by an adverse supply shock a) What will happen to output and the price level in the short run b) What will ha