Expected utility and total utility

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1. Fewer potatoes are demanded when the price of rice has fallen from $ 0.25 to $0.10 cents per pound. The reason for the decline in the market demand for potatoes is because rice and potatoes are substitutes. When there is a decline in the price of rice, more rice will be demanded and fewer potatoes will be demanded.  Since rice becomes relatively cheaper, people would prefer to buy more rice and so their demand for potatoes will decrease, as is the case in substitutes.

U(Y) = Log Y

Ms. Fogg has $10,000 to spend on the trip, if she spends all of it, then her utility will be U (10000) = Log (10000) = 4

2. The Molly Jock wants to buy a high definition television to watch the Olympic Greco roman wrestling competition in Beijing.

Molly jock's income = $20000,
She knows where she can buy television she wants for $2000,
She can buy the same television set at Crazy eddies for $1700 but is unsure, that is true,
The gicen utility function is = Ln (Y)
Where, Y is the income after purchase the television.

Reference no: EM1316409

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