HomeworkLib
Question

Aristotle consumes diamonds (d) and water (w) and his utility function is given by U(d,w) =...

Aristotle consumes diamonds (d) and water (w) and his utility function is given by U(d,w) =
Currently he has no diamonds and 37 water. How much water is Aristotle willing to give up for 25
diamonds?

Answer: 5

Please explain, thanks

business   economics   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Solution: 5 water Working: U(d,w) -J+ w For 25 diamonds Aristotle will be willing to give 5 (25-5) water

0 0
Add a comment
Know the answer?
Add Answer to:
Aristotle consumes diamonds (d) and water (w) and his utility function is given by U(d,w) =...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • ubariho Julius’ utility function is U(W)=ln(W). His current wealth is $5,000. He is now given a...

    ubariho Julius’ utility function is U(W)=ln(W). His current wealth is $5,000. He is now given a chance to buy a futures contract on Nickel that gives him 75% chance of winning $5,000, and 25% chance of losing $4,000. What is his, Julius’ certainty equivalent for holding the futures contract?

  • Sam’s utility function is U(x, y) = 2x + y, where x is the number of...

    Sam’s utility function is U(x, y) = 2x + y, where x is the number of x’s he consumes per week and y is the number of y’s he consumes per week. Sam has $200 a week to spend. The price of x is $4. Sam currently doesn’t consume any y. Sam has received an invitation to join a club devoted to the consumption of y. If he joins the club, Sam can get a discount on the purchase of...

  • Donald consumes goods x1 and x2. His utility function is U(x1, x2) = x1(x2)3. He is...

    Donald consumes goods x1 and x2. His utility function is U(x1, x2) = x1(x2)3. He is endowed with 43 units of x1 and 7 units of x2. The price of x1 is $1 and the price of x2 is $3. Find his net demand for x1. a) b) c) d) e)

  • Gamma’s utility function over wealth levels w is given by u(w) = √ w. His initial...

    Gamma’s utility function over wealth levels w is given by u(w) = √ w. His initial wealth is $400. With probability π, Gamma will get into an accident that will result in a loss of $300. With probability (1 − π), Gamma does not have an accident, and hence suffers no loss. 1. Argue (mathematically) that Gamma is risk averse. 2. What is the expected value of Gamma’s loss? 3. ABC Inc. sells auto insurance. It charges a premium of...

  • Aaron consumes only 2 goods: avocados (a) and bread (b). His utility function is U(a,b)=ab, with...

    Aaron consumes only 2 goods: avocados (a) and bread (b). His utility function is U(a,b)=ab, with MUa=b and MUb=a. The price of avocados is $4 and Aaron’s income is $24. He spends his entire income on his current consumption bundle of two avocados and eight loaves of bread. a) What is the price of a loaf of bread?

  • 2. Janice consumes two goods, X and Y. Janice has a utility function given by the...

    2. Janice consumes two goods, X and Y. Janice has a utility function given by the expression: U = 4x0.5y 0.5 The current prices of X and Y are $25 and $50, respectively. Janice currently has an income of $750 per time period (Put X on the horizontal axis and Y on the vertical axis). a) Is the assumption that "more is better” satisfied for both goods? b) Calculate MRSxy. Determine if it is diminishing for this utility function. c)...

  • (10 Question 1: marks) Given is the Total Utility Function along with Budget Constraint: Utility Function:...

    (10 Question 1: marks) Given is the Total Utility Function along with Budget Constraint: Utility Function: U (X, Y) = X°.270.3 Budget Constraint: I = XP, + YP, a. What is the consumer's marginal utility for X and for Y? b. Suppose the price of X is equal to 4 and the price of Y equal to 6. What is the utility maximizing proportion of X and Y in his consumption? {construct the budget constraint) c. If the total amount...

  • Suppose utility is given by the following function: u(x, y) = xy3 Use this utility function...

    Suppose utility is given by the following function: u(x, y) = xy3 Use this utility function to answer the following questions: (d) What is the marginal rate of substitution implied by this utility function? What does this mean in words? (e) How much of each good would this individual need to have to be willing to trade 1 unit of good x for 1 unit of good y (i.e. for the MRS to be equal to 1)? (f) Suppose we...

  • Noah Doe consumes two goods, X and Y. Noah has a utility function given by the...

    Noah Doe consumes two goods, X and Y. Noah has a utility function given by the expression: U(X,Y) = x2y3 The current prices of X and Y are 4 and 3, respectively. Janice currently has an income of 100 per time period. (a) Write an expression for Noah's budget constraint. (4 marks) (b) Calculate the optimal quantities of X and Y that Noah should choose, given his budget constraint. (16 marks)

  • Joe's wealth is $100 and he maximizes his expected utility. Joe’s utility as a function of...

    Joe's wealth is $100 and he maximizes his expected utility. Joe’s utility as a function of his wealth is U(W) = W1/2. Joe might oversleep his economics exam. He figures there is only a 1 in 10 5 chance that he will, but if he does, it will cost him $100 in fees to the University to take an exam later. Joe's neighbor, Mary, never oversleeps. She offers to wake Joe one hour before the test, but he must pay...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT