Two or more payment plans-write down the budget equation

Assignment Help Business Economics

Reference no: EM13853842

With some services, e.g., checking accounts, phone service, or pay TV, consumers choose between two or more payment plans. One can either pay a high entry fee and get a low price per unit of the service or pay a low entry fee and a high price per unit of the service. Suppose you have an income of $100. There are two plans. Plan A has an entry fee of $20 with a price of $2 per unit of the service. Plan B has an entry fee of $40 with a price of $1 per unit of service. Let x be expenditure on other goods (in dollars) and y be consumption of the service. (a) Write down the budget equation that you would have after you paid the entry fee for each of the two plans. (b) If your utility function is U(x; y) = xy, how much y would you choose in each case? (c) Which plan would you prefer? Explain.

Reference no: EM13853842

Questions Cloud

Production and consumption before and after trade : With the help of a diagram show how home will benefit from trade according to the Ricardian Model. In your diagram, clearly mark the point of production and consumption before and after trade, mark the amount of import or export.

The steady-state rate of unemployment : The steady-state rate of unemployment is U/L = s/(s+f). Suppose that the unemployment rate does not begin at this level. Show that the unemployment rate will evolve over time and reach this steady state. (Hint: Express the change in the number of une..

Explain the meaning of the y-intercept : Perform the analysis on hypothesis testing with level of significance of 5%. Do you think Bill de Blasio's statement is correct - Estimate the least square regression lines and explain the meaning of the y-intercept (b0) term and the estimate of sl..

Why is this case a good example of the business case : How does an inclusion strategy for diversity differ from a valuing differences strategy? Why is this case a good example of the business case for diversity

Two or more payment plans-write down the budget equation : With some services, e.g., checking accounts, phone service, or pay TV, consumers choose between two or more payment plans. One can either pay a high entry fee and get a low price per unit of the service or pay a low entry fee and a high price per uni..

Influence peoples decision-making regarding fuel efficiency : How might you use information about design concepts to help you make future decisions? For example, when reading studies reported in newspapers or magazines how will the nature of the study influence your decisions to either take action or change you..

Current employment challenges facing role of human resources : What has been the impact of the role of Human Resources with offshoring, mergers, the economy, and recession? What are other current employment challenges facing the role of Human Resources

Draw the ten shrimp ball isoquant curve : Consider a shrimp restaurant at Fisherman’s Wharf in San Fransisco. The chef at the restaurant chooses whether to use farm-raised or wild-caught shrimp to produce the main dish – shrimp balls. Draw the ten shrimp ball isoquant curve. Add to this gr..

Think about how you can check whether marginal benefit : hink about how you can check whether marginal benefit equals marginal cost for each of your household’s activities. Are your household’s resources allocated fairly? Think about the two ideas of fairness and how they apply in your household. By what m..

User Account

All Pages