An individual has utility function U(x, y) = u(x) + y for some function u(x) which...
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An individual has utility function U(x, y) = u(x) + y for some function u(x) which also obeys all of our typical assumptions for a rational utility function. In reality, though, x is a discrete item, such that the individual's consumption can only be x = 0 or x = 1. For convenience, assume that py = 1. a) Derive a mathematical expression for the range of values for p that would lead to the individual choosing x = 1. (5 points) b) What is the indirect utility function associated with this individual? (5 points) An individual has utility function U(x, y) = u(x) + y for some function u(x) which also obeys all of our typical assumptions for a rational utility function. In reality, though, x is a discrete item, such that the individual's consumption can only be x = 0 or x = 1. For convenience, assume that py = 1. a) Derive a mathematical expression for the range of values for p that would lead to the individual choosing x = 1. (5 points) b) What is the indirect utility function associated with this individual? (5 points)
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a Ux y ux y ux Ux y y u1 U1 y y u0 U0 y y The individual will choose x1 i... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0071339476
Volume 1, 6th Edition
Authors: Beechy Thomas, Conrod Joan, Farrell Elizabeth, McLeod Dick I
Posted Date:
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