14.3 (0) Quasimodo consumes earplugs and other things. His utility function for
ID: 1106444 • Letter: 1
Question
14.3 (0) Quasimodo consumes earplugs and other things. His utility function for earplugs z and money to spend on other goods y is given by u(z, y)-100x--+ y. (a) What kind of utility function does Quasimodo have? (b) What is his inverse demand curve for earplugs? (c) If the price of earplugs is $50, how many earplugs will he consume? (d) If the price of earplugs is $80, how many earplugs will he consume? (e) Suppose that Quasimodo has $4,000 in total to spend a month. What is his total utility for earplugs and money to spend on other things if the price of earplugs is $50?Explanation / Answer
(a) What kind of utility function does Quasimodo have? Quasilinear. ( Actually in the utility function x is not linear but y is linear thats why its a quasi linear function)
(b) What is his inverse demand curve for earplugs? P=100x
(c) If the price of earplugs is $50, how many earplugs will he consume?50
Explanation:- ( P=100-x, x=100-P so x= 100-50 = 50)
(d) If the price of earplugs is $80, how many earplugs will he consume?20
Explanation:- ( P=100-x, x=100-P so x= 100-80 = 20)
(e) Suppose that Quasimodo has $4000 in total to spend a month. What is his total utility for earplugs and money to spend on other things if the priceof earplugs is $50? $5250
Explanation:- px=50x=50y=4000(50)(50) =1500 ( px is given in the question and x we will got from Question number C answer)
So Total Utility = u(50,1500) =$5250
(f) What is his total utility for earplugs and other things if the price ofearplugs is $80? $4200
ExplanationAns:- px=80x=20y=$2400 ( px is given in the question and x we will got from Question number D answer)
So Total Utility = u(20,2400) =$4200
(g) Utility decreases by 1050 when the price changes from $50 to $80.
Explanation:- Total utility $5250 at the price of $50 & Total utility $4200 at the price of $80 so $5250-$4200 = $1050
(h) What is the change in (net) consumer’s surplus when the price changesfrom $50 to $80? 1050.
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