+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
Calculate the optimal money growth rate needed for the Fed to hit its inflation target in the long run and Fed instead maintained the money growth rate from part A, what is li
The real and financial frameworks, that Ireland's unemployment rate will remain stubbornly high over the coming years, perhaps falling somewhat only through rising emigratio
What would you expect to be the value P(having the trait and blue eyes) if eye color and trait status were independent? C. Which of the following expressions describes
Suppose that the price of gasoline rises, and at the same time, the price of steel(an input to automiblile production) falls. Show this on your graph. If you have no other i
The United State Congress is currently debating new budget. Most Republicans wish to reduce federal spending. Democrats do not want to decrease federal spending by as much as
One of the limiting resources in our economy is time. As a society, we make selection about allocation of time in work and other pursuits.
There is a shortage of college basketball and football tickets for some games, and a surplus occurs for other games. Explain why do shortages and surpluses exist for differe
You are looking to install a new solar energy system for your house (for heating, air conditioning, and hot water). The cost of the system is $14,000 and the annual savings
Elucidate why this strategy may, in fact, be rational. Also, identify at least two other strategies that might permit Argyle to earn higher profits.
Suppose that two power plants, company 1 and 2 release sulfur dioxide (SO2) in a small urban community that exceeds the emissions standard.
There are 168 hours in a week. Of these, about 60hours will go to sleeping (more or less). That leaves 108 hours forwhich we have a choice in terms of how we will spend that
Advanced technology digalized theEDG read out and the demand for the old style machine dropped. The drop in demand resulted in a demand resulted in a demand curve of P=3900-.1