A person has preferences of the form U(pounds of restaurant food, pounds of home food) =...
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A person has preferences of the form U(pounds of restaurant food, pounds of home food) = 0.6* In(pounds of restaurant food) + 0.4* In(pounds of home food) Which basket would they prefer? Note that "lbs." is the abbreviation for pounds. Restaurant food Home food Basket A Basket B 1000 lbs. 750 lbs. 750 lbs. 1000 lbs. The person has $25,000 to spend on food in total. How much do they spend on food at home and how much on food at the restaurant? Food in a restaurant costs $20 per pound, and food at home costs $10 per pound. How many pounds does the person consume at home, and how much do they eat at the restaurant? Why does this choice contradict your answer to question 2, where they prefer the other basket? If the person buys one less pound of restaurant food, how many more pounds of home food could they buy? Instead of having $25,000 to spend on food, the person owns 2,500 pounds of food to make at home. What is the value of this food at the current prices, and is the optimal consumption any different? A person has preferences of the form U(pounds of restaurant food, pounds of home food) = 0.6* In(pounds of restaurant food) + 0.4* In(pounds of home food) Which basket would they prefer? Note that "lbs." is the abbreviation for pounds. Restaurant food Home food Basket A Basket B 1000 lbs. 750 lbs. 750 lbs. 1000 lbs. The person has $25,000 to spend on food in total. How much do they spend on food at home and how much on food at the restaurant? Food in a restaurant costs $20 per pound, and food at home costs $10 per pound. How many pounds does the person consume at home, and how much do they eat at the restaurant? Why does this choice contradict your answer to question 2, where they prefer the other basket? If the person buys one less pound of restaurant food, how many more pounds of home food could they buy? Instead of having $25,000 to spend on food, the person owns 2,500 pounds of food to make at home. What is the value of this food at the current prices, and is the optimal consumption any different?
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Answer rating: 100% (QA)
Solution 1 To determine which basket the person would prefer we can plug in the values for each basket into the utility function and see which one res... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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