Explain why two indifference curves cannot intersect. Donald derives utility from only two goods, carrots (Qe) and donuts (Qa). His utility function is asfollows:U(Q,Qa) = Q•*QaDonald has an income (I) of $120 and the price of carrots (Pc) and donuts (Pa) are both $1.a. What is Donald's budget constraint?b. What is Donald's utility-maximizing condition?c. What quantities of carrots and donuts will maximize Donald's utility?d. Holding Donald's income and Pa constant at $120 and $1 respectively, what is Donald's demandfunction for carrots?e. Suppose that a tax of $1 per unit is levied on donuts. How will this alter Donald's utility maximizingmarket basket of goods?f. Suppose that, instead of the per unit tax in (e), a lump sum tax of the same total dollar amount islevied on Donald. What is Donald's utility maximizing market basket?g. While the taxes in (e) and (f) collect exactly the same amount of revenue for the government, whichof the two taxes would Donald prefer? Show your answer numerically and explain why Donald prefersthe per unit tax over the lump sum tax, or vice versa, or why he is indifferent between the two taxes.

Utility is the satisfaction that a consumer derives from the consumption of a good. Indifference…

Donald derives utility from only two goods, carrots (Q.) and donuts (Qa). His utility function is as follows: U(Q..Qa) = Q.*Q« Donald has an income (1) of $120 and the price of carrots (P.) and donuts (Pa) are both $1. a. What is Donald's budget constraint? b. What is Donald's utility-maximizing condition? c. What quantities of carrots and donuts will maximize Donald's utility?

Donald derives utility from only two goods, carrots (Q.) and donuts (Qa). His utility function is as follows: U(Q..Qa) = Q.*Q« Donald has an income (1) of $120 and the price of carrots (P.) and donuts (Pa) are both $1. a. What is Donald's budget constraint? b. What is Donald's utility-maximizing condition? c. What quantities of carrots and donuts will maximize Donald's utility?

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter6: Consumer Choice Theory

Section6.A: Indifference Curve Analysis

Problem 3SQP

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Question

Explain why two indifference curves cannot intersect.

Donald derives utility from only two goods, carrots (Qe) and donuts (Qa). His utility function is as
follows:
U(Q,Qa) = Q•*Qa
Donald has an income (I) of $120 and the price of carrots (Pc) and donuts (Pa) are both $1.
a. What is Donald's budget constraint?
b. What is Donald's utility-maximizing condition?
c. What quantities of carrots and donuts will maximize Donald's utility?
d. Holding Donald's income and Pa constant at $120 and $1 respectively, what is Donald's demand
function for carrots?
e. Suppose that a tax of $1 per unit is levied on donuts. How will this alter Donald's utility maximizing
market basket of goods?
f. Suppose that, instead of the per unit tax in (e), a lump sum tax of the same total dollar amount is
levied on Donald. What is Donald's utility maximizing market basket?
g. While the taxes in (e) and (f) collect exactly the same amount of revenue for the government, which
of the two taxes would Donald prefer? Show your answer numerically and explain why Donald prefers
the per unit tax over the lump sum tax, or vice versa, or why he is indifferent between the two taxes.

Defintion Defintion Curve that represents the graphical relationship between the total supply of goods and services and the price level in the economy. When the price level increases, producers tend to supply more of a product in the market to earn a higher revenue or vice versa.

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