Two consumers, Owen and Sylvan have preferences over two goods, X (on the horizontal axis) and Y. Owen's utility function is U₂ (X, Y) = 12X + 3Y, while Sylvan's utility function is Us (X,Y)= 6X + 8Y, where X, Y > 0. Owen has £120 to spend, while Sylvan has £168 to spend. The market demand and supply functions for good X are: Qax = 500 - 7P; Qsx = 180 +9P. The market demand and supply functions for good Y are: Qay = 600 - 12P; Qsy = 120 +8P. Which of the following is correct? (a) Owen will purchase 6 units of good X and 0 units of good Y, while Sylvan will purchase 0 units of good X and 7 units of good Y. (b) Owen will purchase 0 units of good X and 5 units of good Y, while Sylvan will purchase 8.4 units of good X and 0 units of good Y.
Two consumers, Owen and Sylvan have preferences over two goods, X (on the horizontal axis) and Y. Owen's utility function is U₂ (X, Y) = 12X + 3Y, while Sylvan's utility function is Us (X,Y)= 6X + 8Y, where X, Y > 0. Owen has £120 to spend, while Sylvan has £168 to spend. The market demand and supply functions for good X are: Qax = 500 - 7P; Qsx = 180 +9P. The market demand and supply functions for good Y are: Qay = 600 - 12P; Qsy = 120 +8P. Which of the following is correct? (a) Owen will purchase 6 units of good X and 0 units of good Y, while Sylvan will purchase 0 units of good X and 7 units of good Y. (b) Owen will purchase 0 units of good X and 5 units of good Y, while Sylvan will purchase 8.4 units of good X and 0 units of good Y.
Chapter3: Preferences And Utility
Section: Chapter Questions
Problem 3.7P
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Transcribed Image Text:2.
Two consumers, Owen and Sylvan have preferences over two goods, X (on the horizontal
axis) and Y. Owen's utility function is Uo (X, Y) = 12X + 3Y, while Sylvan's utility
function is Us (X,Y)
=
6X +8Y, where X, Y > 0. Owen has £120 to spend, while Sylvan
has £168 to spend. The market demand and supply functions for good X are: Qax =
500 - 7P; Qsx 180 +9P. The market demand and supply functions for good Y are:
Qay = 600 - 12P; Qsy = 120 + 8P. Which of the following is correct?
=
(a) Owen will purchase 6 units of good X and 0 units of good Y, while Sylvan will
purchase 0 units of good X and 7 units of good Y.
(b) Owen will purchase 0 units of good X and 5 units of good Y, while Sylvan will
purchase 8.4 units of good X and 0 units of good Y.
Transcribed Image Text:(c) Owen will purchase 5 units of good X and 0 units of good Y, while Sylvan will
purchase 0 units of good X and 8.4 units of good Y.
(d) Owen will purchase 7.5 units of good X and 0 units of good Y, while Sylvan will
purchase 0 units of good X and 42 units of good Y.
(e)
Owen will purchase 6 units of good X and 0 units of good Y, while Sylvan will
purchase 8.4 units of good X and 0 units of good Y.
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