John currently lives in Sydney where he earns $2700 a week as a high school principal. If he moves to Batemans Bay, he has to accept a position as a classroom teacher where he will earn $2100 a week. John only considers two goods, cost of living (c) and health (h). In Sydney,Pc = 54 and ph = 90. In Batemans Bay, ph = 36. John's utility function is u(c, h) = h + c2h2.a) What is John's optimal consumption of h in Sydney?13.5One possible correct answer is: 17.715b) What would be John's optimal consumption of c in Batemans Bay?One possible correct answer is: 24.243c) What is the maximum cost of living ph such that John will accept to move to Batemans Bay?One possible correct answer is: 73.651

A consumer consumes goods and services to maximize their utility. The utility is the want satisfying…

John currently lives in Sydney where he earns $2700 a week as a high school principal. If he moves to Batemans Bay, he has to accept a position as a classroom teacher where he will earn $2100 a week. John only considers two goods, cost of living (c) and health (h). In Sydney, Pe = 54 and p = 90. In Batemans Bay, Ph= 36. John's utility function is u(c, h) =h+ ch2. a) What is John's optimal consumption of h in Sydney? 13.5 One possible correct answer is: 17.715 b) What would be John's optimal consumption of c in Batemans Bay? One possible correct answer is: 24.243 c) What is the maximum cost of living Ph such that John will accept to move to Batemans Bay? One possible correct answer 73.651

John currently lives in Sydney where he earns $2700 a week as a high school principal. If he moves to Batemans Bay, he has to accept a position as a classroom teacher where he will earn $2100 a week. John only considers two goods, cost of living (c) and health (h). In Sydney, Pe = 54 and p = 90. In Batemans Bay, Ph= 36. John's utility function is u(c, h) =h+ ch2. a) What is John's optimal consumption of h in Sydney? 13.5 One possible correct answer is: 17.715 b) What would be John's optimal consumption of c in Batemans Bay? One possible correct answer is: 24.243 c) What is the maximum cost of living Ph such that John will accept to move to Batemans Bay? One possible correct answer 73.651

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter6: Consumer Choice Theory

Section: Chapter Questions

Problem 5SQ

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