In some communities water is priced according to a

Reference no: EM13378673

In some communities water is priced according to a "two-tiered declining block method." According to this scheme, an individual pays an initial minimum charge, which entitles her to a specified quantity of water. After she exceeds this specified quantity of water, she is subject to "declining block pricing"-as more water is purchased, the price per gallon drops.

a. In a diagram with gallons of water on the horizontal axis and all of other goods on the vertical, sketch the budget constraint associated with this scheme. (You do not have enough information to know the exact slope and intercepts. Just sketch a constraint that is generally consistent with this scheme.)

b. Given that an individual has paid the initial minimum charge, do you expect her to consume less than the amount to which the minimum charge entitles her? To answer this question properly, you need to superimpose some indifference curves on the same diagram as the budget constraint. According to your diagram, can an amount less than that to which the minimum charge entitles the individual ever be part of a utility-maximizing bundle?

Reference no: EM13378673

Questions Cloud

Production cost report missing informationmarion chemicals : production cost report missing informationmarion chemicals produces a chemical used as a base in paints. in the

Government consumption in our model is simply a waste that : government consumption in our model is simply a waste that is it does not affect anyones utility or affect the

Production cost report aussie yarn co is a us producer of : production cost report aussie yarn co. is a u.s. producer of woolen yarn made from wool imported from australia. raw

For livia coffee and tea are perfect substitutes one cup of : for livia coffee and tea are perfect substitutes one cup of coffee is equivalent toone cup of tea. suppose livia has 90

In some communities water is priced according to a : in some communities water is priced according to a two-tiered declining block method. according to this scheme an

Profits from recycling paper cardboard aluminum and glass : profits from recycling paper cardboard aluminum and glass at a liberal arts college have increased at a constant rate

Income from the mining of mineral deposits usually : income from the mining of mineral deposits usually decreases as the resource becomes more difficult to extract.

Problem 1 - journal entries larney corporationlarney : problem 1 - journal entries larney corporationlarney corporation uses process costing. a number of transactions that

Design specifications require that the diameter of an : design specifications require that the diameter of an automotive axel measure 200 plusmn 18 mm. the milling process

User Account

All Pages