Leonidas has a utility function u(x, y) = x + 3y, an income of 12 and works in Sparta, where the prices of x and y are both 2. (a) What is Leonidas’ current utility? (b) Leonidas’ boss is thinking of sending him to Athens where the price of x is 1 and the price of y is 4. Leonidas says this is as bad as a cut in pay of γ. What is γ equal to? (b) He also says that he wouldn’t mind moving if his pay was increased by δ when he moved. What is δ equal to?
Leonidas has a utility function u(x, y) = x + 3y, an income of 12 and works in Sparta, where the prices of x and y are both 2. (a) What is Leonidas’ current utility? (b) Leonidas’ boss is thinking of sending him to Athens where the price of x is 1 and the price of y is 4. Leonidas says this is as bad as a cut in pay of γ. What is γ equal to? (b) He also says that he wouldn’t mind moving if his pay was increased by δ when he moved. What is δ equal to?
Chapter3: Preferences And Utility
Section: Chapter Questions
Problem 3.3P
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Leonidas has a utility function u(x, y) = x + 3y, an income of 12 and works in Sparta, where the prices of x and y are both 2.
(a) What is Leonidas’ current utility?
(b) Leonidas’ boss is thinking of sending him to Athens where the
(b) He also says that he wouldn’t mind moving if his pay was increased by δ when he moved. What is δ equal to?
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