Essential starch food and non-essential protein food

Assignment Help Business Economics

Reference no: EM131425954

A low-income family has a daily budget of M dollars to spend on an essential starch food (S) and a non-essential protein food (PF). The family's preferences are equal to U(PF, S) = PF + S^0.5. The protein food costs eight times the starch food. In a diagram, measure units of starch food along the horizontal and draw the family's budget constraint when M = $12 and ps = $1.

1. Write the family's Lagrangian function.

2. Write the first order conditions of the maximization problem.

3. Find the family's optimal bundle.

4. In the diagram, add an indifference curve and illustrate the family's optimal bundle.

5. How much money should this family receive in aid to decide to buy one pound of protein food?

Reference no: EM131425954

Questions Cloud

Absolute disadvantage in the production : If Nation 1 has an absolute disadvantage in the production of fur hats and shoes when compared to Nation 2, it is still possible that Nation 2 can move resources into the production of shoes and trade for fur hats imported from N1 and thereby make co..

Would this price change affect the consumer demand for food : A consumer has preferences for food and entertainment equal to U(qF, qE) = qF2 qE. Suppose the consumer's budget is $1,000 and the unit price of entertainment is $10 Find the consumer's demand for food. Suppose the price of entertainment increased to..

Consider an economy with a representative consumer : Consider an economy with a representative consumer, a representative firm and a government. The consumer owns K unit of capital that she can rent to the firms at a price r, and can work for up to h hours at an hourly rate of w. efine an equilibrium f..

The specific-factors model is termed short-run model because : Which of the following is NOT an assumption of monopolistic competition? The specific-factors model is termed a “short-run” model because: The specific-factors model is termed a “short-run” model because:

Essential starch food and non-essential protein food : A low-income family has a daily budget of M dollars to spend on an essential starch food (S) and a non-essential protein food (PF). The family's preferences are equal to U(PF, S) = PF + S^0.5. The protein food costs eight times the starch food. Write..

At least half a dozen states : "At least half a dozen states and cities from Florida to Hawaii now impose $2 to $7 surcharges on car rentals. These fees can amount to as much as a 30% tax on 1day rentals."

The federal income tax code : Suppose, as in the federal income tax code for the United States, that the representative consumer faces a wage income tax with a standard deduction. That is, the representative consumer pays no tax on wage income for the first x units of real wage i..

Attract more customers and is considering starting promotion : A grocery store wishes to attract more customers and is considering starting a promotion. The supermarket could give a discount on some frequently purchased items or a general discount. In your diagram, show how the discount would affect the budget c..

Without international trade ability of nation to specialize : Without international trade the ability of a nation to specialize in what it produces relatively more efficiently would be meaningless and its production possibilities would always be equal to its consumption alternatives.

User Account

All Pages