Suppose you are very picky about your outdoor BBQ experiences --- and you need exactly 1 cup of lighter fluid for each bag of charcoal you use. If you have either leftover charcoal or leftover lighter fluid, you simply discard it.

a. Letting cups of lighter fluid be denoted as and bags of charcoal as , give the simplest possible utility function that captures your tastes.

b. Suppose that your favorite charcoal has just gotten better because the producer has infused the charcoal with half a cup of lighter fluid per bag. How does your answer to (a) change?



What will be an ideal response?


a.



b. or

Economics

You might also like to view...

If a contractionary monetary policy is adopted, ________

A) the real interest rate will fall B) real output will increase C) the price level will fall D) the demand for labor will increase

Economics

The Social Security system is a(n)

A) ad valorem system. B) ability to pay system. C) progressive tax system. D) pay-as-you-go system.

Economics

Which of the following will shift the demand curve for capital leftward?

a. Introduction of supercomputers in the resource market b. A fall in the market interest rates c. An increase in the price of capital d. Business expectations of increased regulations e. A rise in the equilibrium wage of labor

Economics

Which of the following statements is TRUE if your money income stays the same but the price of one good that you are buying goes up?

A. You will have to reduce the quantities you purchase of all goods. B. Your nominal income has been decreased. C. Your real income has increased. D. Your effective purchasing power falls.

Economics