Topic 5: Consumer behavior
I. Self-Check Questions
Task A:
Jeremy is deeply in love with Jasmine. Jasmine lives where cell phone
coverage is poor, so he can either call her on the land-line phone for
five cents per minute or he can drive to see her, at a round-trip cost of
$2 in gasoline money. He has a total of $10 per week to spend on
staying in touch. To make his preferred choice, Jeremy uses a handy
utilimometer that measures his total utility from personal visits and
from phone minutes. Using the values in Table 5.6, figure out the
points on Jeremy’s consumption choice budget constraint (it may be
helpful to do a sketch) and identify his utility-maximizing point.
1. We need to find the budget constraint line:
10=2∗RT +0.05∗PM
{
10−2∗0
PM = =200 , RT =0
0.05
10−2∗1
PM = =160 , RT =1
0.05
10−2∗2
PM = =120 , RT =2
0.05
10−2∗3
PM= =80 , RT =3
0.05
10−2∗4
PM = =40 , RT =4
0.05
10−2∗5
PM= =0 , RT =5
0.05
(Optional): Design a graph for the budget constraint line:
I. Self-Check Questions
Task A:
Jeremy is deeply in love with Jasmine. Jasmine lives where cell phone
coverage is poor, so he can either call her on the land-line phone for
five cents per minute or he can drive to see her, at a round-trip cost of
$2 in gasoline money. He has a total of $10 per week to spend on
staying in touch. To make his preferred choice, Jeremy uses a handy
utilimometer that measures his total utility from personal visits and
from phone minutes. Using the values in Table 5.6, figure out the
points on Jeremy’s consumption choice budget constraint (it may be
helpful to do a sketch) and identify his utility-maximizing point.
1. We need to find the budget constraint line:
10=2∗RT +0.05∗PM
{
10−2∗0
PM = =200 , RT =0
0.05
10−2∗1
PM = =160 , RT =1
0.05
10−2∗2
PM = =120 , RT =2
0.05
10−2∗3
PM= =80 , RT =3
0.05
10−2∗4
PM = =40 , RT =4
0.05
10−2∗5
PM= =0 , RT =5
0.05
(Optional): Design a graph for the budget constraint line:
