Andrea has a budget of £21 to spend on toothbrushes and tooth paste. He does not receive any utility from owning a toothbrush, but for the consumption of every tube of tooth paste he gains a utility of 2 utils – but only if he owns a tooth brush. Without a tooth brush, Andrea gains no utility from consuming tooth paste. In addition, after consuming 10 tubes of tooth paste, a toothbrush needs to be replaced, i.e., Andrea needs to buy a new one. The current price of tooth brushes on the market is £5 and the current price for tooth paste is £1 per tube. Assume that Andrea aims to maximise consumer surplus. a) Find Andrea's income-consumption curve for tooth paste tubes for incomes between £0 and £21, assuming a price of £1 per tube.
Andrea has a budget of £21 to spend on toothbrushes and tooth paste. He does not receive any utility from owning a toothbrush, but for the consumption of every tube of tooth paste he gains a utility of 2 utils – but only if he owns a tooth brush. Without a tooth brush, Andrea gains no utility from consuming tooth paste. In addition, after consuming 10 tubes of tooth paste, a toothbrush needs to be replaced, i.e., Andrea needs to buy a new one. The current price of tooth brushes on the market is £5 and the current price for tooth paste is £1 per tube. Assume that Andrea aims to maximise consumer surplus. a) Find Andrea's income-consumption curve for tooth paste tubes for incomes between £0 and £21, assuming a price of £1 per tube.
Chapter6: Demand Relationships Among Goods
Section: Chapter Questions
Problem 6.9P
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Transcribed Image Text:Andrea has a budget of £21 to spend on toothbrushes and tooth paste. He does not
receive any utility from owning a toothbrush, but for the consumption of every tube of
tooth paste he gains a utility of 2 utils – but only if he owns a tooth brush. Without a
tooth brush, Andrea gains no utility from consuming tooth paste. In addition, after
consuming 10 tubes of tooth paste, a toothbrush needs to be replaced, i.e., Andrea
needs to buy a new one. The current price of tooth brushes on the market is £5 and
the current price for tooth paste is £1 per tube. Assume that Andrea aims to
maximise consumer surplus.
a) Find Andrea's income-consumption curve for tooth paste tubes for incomes
between £0 and £21, assuming a price of £1 per tube.
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