Answered: 7. Bob receives utility from days spent…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter6: Consumer Choices

Section: Chapter Questions

Problem 1SCQ: Jeremy is deeply in love with Jasmine. Jasmine lives where cell phone coverage is poor, so he can...

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7. Bob receives utility from days spent traveling on vacation domestically (D) and days
spent traveling in a foreign country (F) as given by the utility
U(D; F) = DF
The price of a day spent traveling domestically is 160 pounds and in a foreign
country 200 pounds. Bobís annual budget for traveling is 8000 pounds.

(a) Find Bobís utility maximising choice of days traveling domestically and of days
travelling in a foreign country. Find also his utility level from consuming that
bundle. Suppose that the price of domestic traveling increases to 250 pounds per day.
Denoting his budget for traveling x, (suppose by now that it is unknown) find
the demand for D and F under the new prices as a function of x.

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