Suppose housing (H) and air quality (A) are the only two things entering into Jose's utility and Jose's utility function is U(H,A) = A H. Suppose Jose's income is $10 and the price of housing is $2. 5. If air quality is A = 2, how much housing will Jose purchase? Plot Jose's indiffer- ence curve and budget constraint through this point, showing how much hous- ing is consumed. а. gc weute7 Notes 151 b. Suppose air quality rises to A = 4. Plot Jose's new indifference curve and new consumption point. C. How much would Jose be willing to pay to increase air quality from 2 to 4? 20
Suppose housing (H) and air quality (A) are the only two things entering into Jose's utility and Jose's utility function is U(H,A) = A H. Suppose Jose's income is $10 and the price of housing is $2. 5. If air quality is A = 2, how much housing will Jose purchase? Plot Jose's indiffer- ence curve and budget constraint through this point, showing how much hous- ing is consumed. а. gc weute7 Notes 151 b. Suppose air quality rises to A = 4. Plot Jose's new indifference curve and new consumption point. C. How much would Jose be willing to pay to increase air quality from 2 to 4? 20
Chapter6: Consumer Choice Theory
Section: Chapter Questions
Problem 9SQP
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ISBN:
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Author:
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Publisher:
Cengage Learning