Consider the following utility function belonging to “Consumer A”. UA(x,y,z,v) = x0.1y0.2z0.3v0.4. Suppose that prices of x, y, z and v are 1$, 2$, 3$ and 4$. The consumer’s income is 10$. a. Find the values of x, y,z and v that maximize the consumer’s utility subject to his/her budget constraint. b. Suppose that “Consumer B” has a utility function which is a logarithmic transformation of the consumer A’s utility function, i.e. UB =ln UA. Suppose that prices and income are the same. Would the amounts of x, y, z and v consumed by “Consumer B” be the same as the amounts consumed by “Consumer A”?
Consider the following utility function belonging to “Consumer A”. UA(x,y,z,v) = x0.1y0.2z0.3v0.4. Suppose that prices of x, y, z and v are 1$, 2$, 3$ and 4$. The consumer’s income is 10$. a. Find the values of x, y,z and v that maximize the consumer’s utility subject to his/her budget constraint. b. Suppose that “Consumer B” has a utility function which is a logarithmic transformation of the consumer A’s utility function, i.e. UB =ln UA. Suppose that prices and income are the same. Would the amounts of x, y, z and v consumed by “Consumer B” be the same as the amounts consumed by “Consumer A”?
Microeconomics A Contemporary Intro
10th Edition
ISBN:9781285635101
Author:MCEACHERN
Publisher:MCEACHERN
Chapter6: Consumer Choice And Demand
Section: Chapter Questions
Problem 2QFR
Related questions
Question
Consider the following utility function belonging to “Consumer A”.
UA(x,y,z,v) = x0.1y0.2z0.3v0.4.
Suppose that prices of x, y, z and v are 1$, 2$, 3$ and 4$. The consumer’s income is 10$.
a. Find the values of x, y,z and v that maximize the consumer’s utility subject to his/her budget constraint.
b. Suppose that “Consumer B” has a utility function which is a logarithmic transformation of the consumer A’s utility function, i.e.
UB =ln UA.
Suppose that prices and income are the same. Would the amounts of x, y, z and v consumed by “Consumer B” be the same as the amounts consumed by “Consumer A”?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Economics: Private and Public Choice (MindTap Cou…
Economics
ISBN:
9781305506725
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
Microeconomics: Private and Public Choice (MindTa…
Economics
ISBN:
9781305506893
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
Economics: Private and Public Choice (MindTap Cou…
Economics
ISBN:
9781305506725
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
Microeconomics: Private and Public Choice (MindTa…
Economics
ISBN:
9781305506893
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc
