Micro

Posted by nidhi aggarwal on
URL: http://discussion-forum.276.s1.nabble.com/Micro-tp5202707.html

How to find demand in this

Q:Consider a person who consumes water and fruits, deriving utility min{2x + 5y, 5x + 2y) if x is the amount of water consumed and y is the amount of fruit consumed. Suppose this person’s income is Rs. 12,the unit price of fruit is Rs. 4 and the unit price of water facing this person is Re. 1. The price of water incorporates a per unit of subsidy of Re. 1, i.e., for every unit of water consumed by this person, she pays Re. 1 to the water supplier and the government pays Re. 1 to the water supplier. Suppose this person’s demand is (x0, y0). 1. Suppose the water subsidy is removed and she has to pay Rs. 2 for each unit of water. Let (x1, y1) be the new demand. What is the resulting change in this person’s demand, i.e., what is (x1 – x0, y1– y0)
         a) (-10, 2)
         b) (-6, 0)
         c) (-0.4, -0.4)
         d) (3.6, -2.4)