What is the value of a and b

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Reference no: EM1365117

Nigel's utility function is U(x, y) = min{x, y}. Nigel has $250 and the price of x and the price of y are both $1. Nigel's boss is thinking of sending him to another town where the price of x is $1 and the price of y is $2. The boss offers no raise in pay. Nigel complains bitterly. He says that although he doesn't mind moving for its own sake and the new town is just as pleasant as the old, having to move is as bad as a cut in pay of $A. He also says he wouldn't mind moving if when he moved he got a raise of $B.

What is the value of A?

What is the value of B?

Provide a theoretical interpretation for A, and justify your interpretation.

Provide a theoretical interpretation for B, and justify your interpretation.

Reference no: EM1365117

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