Jose gets utility from the goods he consumes and also the income he earns. His utility function is given by U(q1,q2 ) = q1q2Y Derive Jose's demand equations
Does the fact that he derives utility directly from income affect his consumption in this case?
The demand equations are
qi = Y/2pi
because income is a scalar of his utility and not chosen by Jose; it has no influence on his optimal bundle.
You might also like to view...
An economy in which government bureaucracy decides how much of a good to produce, how to produce the good, and who gets the good is known as a
A) centrally planned economy. B) market economy. C) mixed economy. D) laissez-faire economy.
A bond that promises to pay $X in 10 years must be worth less than $X now.
Answer the following statement true (T) or false (F)
A family that earns $20,000 a year pays $1,000 a year in payroll taxes. A family that earns $40,000 a year pays $2,000 a year in payroll taxes. The payroll tax is
A. a progressive tax. B. a regressive tax. C. a proportional tax. D. a benefits-received tax.
Which of the following refers to human capital?
a. Money spent by business to acquire labor b. The acquired skill and productivity of workers c. The plant and equipment used with labor d. Money spent on purchasing the latest machinery e. Money that workers save