3 5. H2O provides water to the residents of Desa Garden. Residents have to pay RM10 per month for access and are entitled to 40m³ of water free. The subsequent 10m³ is charged RM0.30 per m³, the next 10m³ is charged RM0.50 per m³ and any additional m³ water consumed is charged RM0.60 per m³. Suppose Muthu has budgeted RM21 a month for water and other goods. Let the price of other goods be RM1.00p per unit. a) Draw the budget constraint for water consumption and other goods. Let the x-axis be the consumption of water (m³) and the y-axis be the consumption of other goods (unit). Label your graph clearly and show all the necessary calculations. b) What are the costs to the residents for using an additional 10m³ if they are currently using 58m³ of water? c) Suppose now, there is no access fee of RM10. Instead the first 40m³ water RM0.20 per m³. If the total water consumption exceeds 40m³, the rate jumps to RM0.40 for all m³ (whereby the higher rate applies to all, not just the additional m³). Draw the budget line for the water tariff plan. Show all the necessary calculations. You may draw it on the same diagram as (a) but label the lines clearly.

3 5. H2O provides water to the residents of Desa Garden. Residents have to pay RM10 per month for access and are entitled to 40m³ of water free. The subsequent 10m³ is charged RM0.30 per m³, the next 10m³ is charged RM0.50 per m³ and any additional m³ water consumed is charged RM0.60 per m³. Suppose Muthu has budgeted RM21 a month for water and other goods. Let the price of other goods be RM1.00p per unit. a) Draw the budget constraint for water consumption and other goods. Let the x-axis be the consumption of water (m³) and the y-axis be the consumption of other goods (unit). Label your graph clearly and show all the necessary calculations. b) What are the costs to the residents for using an additional 10m³ if they are currently using 58m³ of water? c) Suppose now, there is no access fee of RM10. Instead the first 40m³ water RM0.20 per m³. If the total water consumption exceeds 40m³, the rate jumps to RM0.40 for all m³ (whereby the higher rate applies to all, not just the additional m³). Draw the budget line for the water tariff plan. Show all the necessary calculations. You may draw it on the same diagram as (a) but label the lines clearly.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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