2
answers
0
watching
149
views
1 Jun 2018
Consider a rational utility maximizing consumer who is choosing between two goods clothing (C) and food (F), where the total utilities of the two goods are independent so that total utility (U) = Utility from clothing + Utility from food. Assume that the utility from these items is outlined below:
Quantity consumed of Food (F):
0
1
2
3
4
5
Utility from F (in utils):
0
12
20
24
26
27
Quantity of clothing (C):
0
1
2
3
4
5
Total Utility from C: (in utils):
0
40
70
90
100
100
Assume further that the price of clothing is $5 per unit and the price of food is $1 per unit, and that the consumer has $18 to spend on the two goods in a given period. Carefully explain how the rational utility maximizing consumer would allocate his/her expenditures on the two goods.
Consider a rational utility maximizing consumer who is choosing between two goods clothing (C) and food (F), where the total utilities of the two goods are independent so that total utility (U) = Utility from clothing + Utility from food. Assume that the utility from these items is outlined below:
| Quantity consumed of Food (F): | 0 | 1 | 2 | 3 | 4 | 5 |
| Utility from F (in utils): | 0 | 12 | 20 | 24 | 26 | 27 |
| Quantity of clothing (C): | 0 | 1 | 2 | 3 | 4 | 5 |
| Total Utility from C: (in utils): | 0 | 40 | 70 | 90 | 100 | 100 |
Assume further that the price of clothing is $5 per unit and the price of food is $1 per unit, and that the consumer has $18 to spend on the two goods in a given period. Carefully explain how the rational utility maximizing consumer would allocate his/her expenditures on the two goods.
Lelia LubowitzLv2
2 Jun 2018
Already have an account? Log in
