Asked by
Donovan Earles
on Dec 01, 2024
Verified
Lolita's utility function is U(x, y) = x - x2/2 + y, where x is her consumption of cow feed and y is her consumption of hay.If the price of cow feed is $.10, the price of hay is $1, and her income is $2 and if Lolita chooses the combination of hay and cow feed that she likes best from among those combinations she can afford, her utility will be
A) 2.40.
B) 3.40.
C) 0.40.
D) 1.90.
E) 1.40.
Utility Function
A mathematical representation of how consumers rank different bundles of goods according to the level of satisfaction or utility those goods provide.
Cow Feed
Food specifically formulated or suitable for feeding cattle.
Consumption
Refers to the total amount of goods and services purchased and used by consumers over a period of time.
- Acquire a thorough understanding of utility functions and how they depict the preferences of consumers.
- Acquire knowledge on how the maximization of utility affects choices made by consumers operating under budgetary restrictions.
Verified Answer
SM
Learning Objectives
- Acquire a thorough understanding of utility functions and how they depict the preferences of consumers.
- Acquire knowledge on how the maximization of utility affects choices made by consumers operating under budgetary restrictions.