Derive the total market demand for water

Assignment Help Microeconomics

Reference no: EM13741887

The Model
Let's imagine there are only three people living in California, but that each of them have preferences described by the following utility function:
u(x1, x2) = x1^1/10 x2^9/10
In that function, x1 is the quantity of water consumed, and x2 is the quantity of the composite good consumed (where the 'composite good' represents 'all other goods').

Details
The three people in our model all have the same preferences, but each has a different income. One of them has an income of $100, another an income of $1,000, and the third has an income of $10,000. The price of water1 is $1 and the price of the composite good is $1. The State of California must reduce the total consumption of water to 300 units.

Derive each of the consumer's demand functions for water without any taxes or rebates: x1(p)
2. Derive the total market demand for water without any taxes or rebates: X^1(p)
3. Determine the total amount of water consumed in this market.
4. Calculate the quantities consumed for each individual consumer without any taxes or rebates.
5. Calculate the level of utility consumed for each individual consumer at these quantities.

Reference no: EM13741887

Questions Cloud

A royalty was for a minor or major patent : If the government could only observe prices, quantities, and royalty rates (But did not know the demand curves or the marginal cost curves), could it determine if a royalty was for a minor or major patent?

What are the equilibrium price and quantity : 1. Market demand for a certain commodity is QD = 12 - P, and the short-run total cost function for the firm is SRTC (Q) = Q2 + 1. a. If the firm behaves as a perfect competitive firm, determine the equilibrium price and quantity.b. If instead the fir..

Ethics of fixed asset accounting : You are the owner of a successful small business. You have just finished a year of large capital investments using borrowed funds. YOUR banker requires quarterly financial statements to monitor the financial health of your company.

The key concepts in economics : Apply one (1) of the following economic concepts (supply, demand, market structures, elasticity, costs of production, GDP, Unemployment, inflation, aggregate demand, and aggregate supply) to the key points that you highlighted in Question 1. Explain ..

Derive the total market demand for water : The three people in our model all have the same preferences, but each has a different income. One of them has an income of $100, another an income of $1,000, and the third has an income of $10,000. The price of water1 is $1 and the price of the compo..

Labor disputes and the sides of the bargaining : Using your personal experiences, research from the course text, and at least two outside scholarly sources, complete a two-to three-page APA style formatted paper (not including the title and reference page). In a narrative format, the paper must ..

What are the advantages of a biological attack : What are the advantages of a biological attack? What are the advantages of a "dirty bomb"? (200 words) APA format.

The aggregate demand curve : One supply-side measure introduced by the Reagan administration was a cut in income tax rates. Use an aggregate demand/aggregate supply diagram to show what effect was intended. What might happen if such a tax cut also shifted the aggregate demand cu..

Describe the common sources of revenue for sports teams : Describe the common sources of revenue for professional sports teams. Why is each source so important to the operations of the teams. How do teams try to manipulate the sources of revenue for increased profit.

User Account

All Pages