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What is a utility function for americans

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Assignment:

In Cambridge, there are individuals from three different citizenships: Ethiopians, Brazilians, and Americans. Coffee is only sourced from Brazil and Ethiopia. Brazilians and Ethiopians only like to drink coffee from their own country, while for Americans a cup of coffee is the same regardless from its origin (Brazil or Ethiopia). All of them have the same level of income denoted by I and α is some coefficient greater than 0.

(1) What is a utility function for Americans?

(2) What is the magnitude (i.e. the absolute value) of the marginal rate of substitution for Americans? (Suppose Brazilian coffee is on the y-axis.)

(3) What is a utility function for Brazilians?

(4) What is the magnitude (i.e. the absolute value) of the marginal rate of substitution for Brazilians? (Suppose Brazilian coffee is on the y-axis.)

(5) What is a utility function for Ethiopians?

Continuing with the above coffee example,

(6) if Pb < Pe, what is the optimal consumption bundle for Americans?

(7) If Pb < Pe, what is the optimal consumption bundle for Brazilians?

(8) If Pb < Pe, what is the optimal consumption bundle for Ethiopians?

Reference no: EM133992978

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