Draw a graph of typical indifference curves

Assignment Help Microeconomics

Reference no: EM132196980

Question: Geriatric Phone Company serves older Americans who live off of Social Security payments. It uses a atrate pricing scheme for data use, unlike more â€œyouth-focusedâ€ companies that allow for unlimited data use. The company charges $2/gigabyte to its consumers for each gigabyte worth of data they download to their phone over the cellular data network. The company has 100,000 data-plan subscribers and they have the same preferences on cellular data (x1) and a composite good(x2). Assume the price of the composite good is $4/unit. Each plan subscriber has the same monthly Social Security income: $3,000. Currently, each subscriber uses 100GB worth of data per month. The company is now considering changing its pricing policy into a two-tier policy: it charges $2/GB for the first 100GB of data, but only $0.5/GB for all additional data. Under this new pricing scheme, will data usage increase? Explain.

(a) Draw a graph of typical indifference curves, budget constraints, the optimal choice of a typical subscriber under the current fixed-rate policy and the new two-tier pricing scheme. Make the horizontal axis the amount of data downloaded (in GB) (x1) and the vertical axis the amount of the composite goods (x2) consumed.

(b) Provide a justification for, and list any necessary assumptions related to, your answer previous answer (a) in a few succinct sentences.

Reference no: EM132196980

Questions Cloud

Simulate a random walk using a coin flip : Simulate a "random" walk using a coin flip. The initial position is the middle of the array and if the coin flip is heads (0) move 1 step to the right.

Explain advantages and disadvantages of globalization : Globalization brings with it both advantages and disadvantages, economic and otherwise. List some of each, according to your own view of globalization.

Create a dunbar object set the force of the object : Write the class that will carry out the following steps. This code would be part of a program, but you only have to write out the steps requested here.

Make the three data members private : Write a class to contain the following information about towns: the name (a sequence of characters); the population (an integer);

Draw a graph of typical indifference curves : Draw a graph of typical indifference curves, budget constraints, the optimal choice of a typical subscriber under the current fixed-rate policy.

Write a c program compute the number of page faults : Write a C program compute the number of page faults for the FIFO page replacement scheme, given a reference string.

Explain graphically the speculative attacks : Explain graphically the speculative attacks that occurred against the British pound in 1992, the Mexican peso in 1994, the Thai baht in 1997.

Fill all array elements with a zero except those diagonal : Declare a two dimensional array with 10 rows and 10 columns of whole numbers.

Does income effect incentivize person to take less leisure : Change the wage to $8. From a starting point of 500 hours of work at $10 an hour, does the income effect incentivize the person to take less leisure.

User Account

All Pages