Solution-Problem based on utility function

Problem based on utility function

Reference no: EM1323

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?

Reference no: EM1323

Questions Cloud

Problem - total cost, average cost, marginal cost : Problem - Total Cost, Average Cost, Marginal Cost: - Complete the following table of costs for a firm. (Note: enter the figures in the MC column between outputs of 0 and 1, 1 and 2, 2 and 3, etc.)

Fixed cost and vairiable cost : Questions: : Which of the following are likely to be fixed costs and which variable costs for a chocolate factory over the course of a month? Explain your choice.

Laffer curve : tax rate and tax revenue : Question based on Laffer Curve : Tax Rate and Tax Revenue, Do raising tax rates necessarily raise tax revenue? What factors affect how tax revenue changes when tax rates change?

Case study analysis about optimum resource allocation : Case study analysis about optimum resource allocation: - Why might you suspect (even without evidence) that the economy might not be able to produce all the schools and clinics the Ministers want? What constraints are there on an economy's productio..

Problem based on utility function : Problem based on Utility Function - Problem, Answer and explain the following using a diagram which is completely labeled.

Derive and compare demand curve : Question based on Derive and compare demand curve, Derive Ambrose's demand function for peanuts. How does it compare with Johnny's demand curve for peanuts?

Long-term federal government budget problems : Question:. Explain why there are long-term Federal government budget problems. Explain why the base-line forecast of the CBO is misleading.

Describe the present economic crisis situation in europe : Describe the present economic crisis situation in Europe. Why has it been so difficult for the Europeans to find a solution to this problem? Comment on what implications the crisis may have for the rest of the world if Europeans are not able to ag..

In using the taylor rule : In using the Taylor Rule as a guideline for monetary policy, what are the pros and cons of using forecasted values of inflation and output rather than observed values of these variables?

User Account

All Pages

Problem based on utility function

Reference no: EM1323

Reference no: EM1323

Questions Cloud

Reviews

Write a Review

Macroeconomics Questions & Answers

Inflation targeting be a good policy

Derive and compare demand curve

In using the taylor rule

Long-term federal government budget problems

Describe the present economic crisis situation in europe

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT