Suppose an individual in the Grossman model is trying to decide what to have for dinner. His options are as below. Each dish has an effect on the level of home good Z and health H. Meal Home good Z Health H Steak and eggs +7 -2 Kale salad with broccoli -2 +5 Entire box of cookies +10 -20 Suppose the dinner's single-period utility function is U=3Z+H 1. If the individual is trying to maximize his single-period utility, and he can only select one item from the table (assuming he can afford any item in the table). Which meal would he choose? Explain your answer. 2. A miracle pill is discovered that halves the negative health impact of cookies. How does this impact the individual's choice? Explain your answer. 3. If the individual lives in multi-period rather than single-period, would he value Z or H more in multi-period? Explain your answer.

Suppose an individual in the Grossman model is trying to decide what to have for dinner. His options are as below. Each dish has an effect on the level of home good Z and health H. Meal Home good Z Health H Steak and eggs +7 -2 Kale salad with broccoli -2 +5 Entire box of cookies +10 -20 Suppose the dinner's single-period utility function is U=3Z+H 1. If the individual is trying to maximize his single-period utility, and he can only select one item from the table (assuming he can afford any item in the table). Which meal would he choose? Explain your answer. 2. A miracle pill is discovered that halves the negative health impact of cookies. How does this impact the individual's choice? Explain your answer. 3. If the individual lives in multi-period rather than single-period, would he value Z or H more in multi-period? Explain your answer.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter10: Consumer Choice Theory

Section: Chapter Questions

Problem 9P

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Suppose an individual in the Grossman model is trying to decide what to have for dinner. His options are as below. Each dish has an effect on the level of home good Z and health H. Мeal Home good Z Нeath H Steak and eggs (A) Kale salad with broccoli (B) Entire box of cookies (C) +7 -2 -2 +5 +10 -20 Suppose the dinner's single-period utility function is U=3Z+H • If the individual is trying to maximize his single-period utility, and he can only select one item from the table (assuming he can afford any item in the table). Which meal would he choose? Please type in A, B, or C (do not enter space, punctuation, or any other symbols or words) • A miracle pill is discovered that halves the negative health impact of cookies. How does this impact the individual's choice? What meal would be chosen now? Please type in A, B, or C (do not enter space, punctuation, or any other symbols or words) • If the individual lives in multi-period rather than single-period, would he value Z or H more in…
What are some key points about the utility-maximization model
What is the logarithmic transform of the utility function U=xα1xβ2xγ3 given the budget constraint px1x1+px2x2+px3x3=M . Select one: a. ln U=ln xα1+ln xβ2+ln xγ3 b. ln U=ln xγ1+ln xβ2+ln xα3 c. ln U=α ln x1−β ln x2−γ ln x3 d. ln U=α ln x1+β ln x2+γ ln x3
Suppose Al is currently consuming five movies and two concerts per month. If his utility function is given by U = 15MC, where Mrepresents the number of movies seen and C represents the number of concerts attended, Al's total utility is equal to: 75 15 150 10 30
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Eren’s two main hobbies are taking vacations overseas (V) and eating expensivemeals (M). His utility function is given as: U(V,M) = V2MLast year, the average price of taking a vacation overseas was US$200 and the averageprice of an expensive meal is $50. However, due to supply problems in Onions, theaverage price of an expensive meal rose to $75. The average price of a vacation did notchange. His income, which is $1500, did not change. Calculate for the equivalent variation (EV) for the price change.
Eren’s two main hobbies are taking vacations overseas (V) and eating expensivemeals (M). His utility function is given as: U(V,M) = V2MLast year, the average price of taking a vacation overseas was US$200 and the averageprice of an expensive meal is $50. However, due to supply problems in Onions, theaverage price of an expensive meal rose to $75. The average price of a vacation did notchange. His income, which is $1500, did not change. Calculate the change in consumer surplus from consuming the expensivemeals considering the price change (Hint: you need to compare his optimalconsumption bundle before and after the price change to get the change in CS).
What is the logarithmic transform of the utility function U=xα1xβ2xγ3U=x1αx2βx3γ given the budget constraint px1x1+px2x2+px3x3=Mpx1x1+px2x2+px3x3=M. Select one: a. ln U=ln xα1+ln xβ2+ln xγ3ln U=ln x1α+ln x2β+ln x3γ b. ln U=α ln x1−β ln x2−γ ln x3ln U=α ln x1−β ln x2−γ ln x3 c. ln U=α ln x1+β ln x2+γ ln x3ln U=α ln x1+β ln x2+γ ln x3 d. ln U=ln xγ1+ln xβ2+ln xα3
I am unsure the direction the utility functions would go in , with this specific scenario
Linda loves buying shoes and going out to dance. Her utility function for pairs of shoes, S, and the number of times she goes dancing per month, T, is U(S,T) = 2ST, so MUs = 2T and MUT = 2S. It costs Linda $50 to buy a new pair of shoes or to spend an evening out dancing. Assume that she has $500 to spend on shoes and dancing. A. What is the equation for her budget line? Draw it (with T on the vertical axis) and label the slope and intercepts. B. What is Linda's marginal rate of substitution? Explain. C. Use math to solve for her optimal bundle. Show how to determine this bundle in a diagram using indifference curves and a budget line.
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