Monetary value on this utility increase

Assignment Help Business Economics

Reference no: EM13817319

a. A young connoisseur has $600 to spend to build a small wine cellar. She enjoys two vintages in particular: a 2001 French Bordeaux (wf) at $40 per bottle and a less expensive 2005 California varietal wine (wc) priced at $8. If her utility is U(wf, wc)=((wf)^2/3)((wc)^1/3) then how much wine should she purchase?

b. When she arrived at the wine store, our young oenologist discovered that the price of the French Bordeaux had fallen to $20 a bottle because of a decrease in the value of the euro. If the price of the California wine remains stable at $8 a bottle how much of each wine should she pruchase to maximize utility under these altered conditions?

c. Explain why this wine fancier is better off in part (b) than in part (a). How would you put a monetary value on this utility increase?

Reference no: EM13817319

Questions Cloud

Corporate cash conversion cycles typically increased : During the Great Recession of 2008-2009, corporate cash conversion cycles typically increased in length by a significant amount. Why might this have occurred? Was it a good decision by corporate CFOs to allow this to happen? Explain.

Effects of aggregate supply and aggregate demand : Participate in a discussion with your classmates regarding where you see the U.S. economy in its business cycle right now, as based on the economic concepts in the textbook. Now that we learned that the real business cycle results from fluctuations i..

According to an old myth : According to an old myth, Native Americans sold the island of Manhattan about 400 years ago for $24. If they had invested this money at 7% interest per year, how much would they have today?

Monetary value on this utility increase : A young connoisseur has $600 to spend to build a small wine cellar. She enjoys two vintages in particular: a 2001 French Bordeaux (wf) at $40 per bottle and a less expensive 2005 California varietal wine (wc) priced at $8. If her utility is U(wf, wc)..

Consider the difference between presenting information : Consider the difference between presenting information in a face-to-face environment versus an online environment. Search the Internet for two different videos of people presenting information in a face-to-face environment.

Describe a time in which the company faced a major crisis : YMCA and Tesla: 1. Competitiveness. How does the company compare to its main competitors? Consider both domestic and local markets. 2. What obstacles does the company face in its sector, and does the company have any innovative approaches to overcomi..

Improve economic growth-reduce unemployment : What macro policy tools would you use or favor in order to improve economic growth, reduce unemployment, and avoid price inflation right now in 2015 in the US?

Government purchases-national saving and investment : Suppose GDP is $8 trillion, taxes are $1.5 trillion, private saving is $0.5 tirllion and public saving is $0.2 trillion. Assuming this economy is closed, calculate consumption, government purchases, national saving, and investment.

User Account

All Pages