Consider Ms. Bijlee whose utility function is , where is her electricity consumption and is her consumption of widgets. Suppose Ms. Bijlee's income is and the prices of widgets and electricity are . In order to curb Ms. Bijlee's electricity consumption, the electricity company decides to impose a surcharge of Re. on every unit of electricity consumed in excess of units. What is the resulting reduction in Ms. Bijlee's electricity consumption?
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Consider Ms. Bijlee whose utility function is min {E,W}, where E is her electricity consumption and W is her consumption of widgets. Suppose Ms. Bijlee's income is 10 and the prices of widgets and electricity are 1. In order to curb Ms. Bijlee's electricity consumption, the electricity company decides to impose a surcharge of Re. 1 on every unit of electricity consumed in excess of 4 units. What is the resulting reduction in Ms. Bijlee's electricity consumption? (A) 1/4 (B) 1/5 (C) 1/3 (D) 1/6
Budget constraint and consumer equilibrium has come up 99 times in 7 exams since 2004.
This question is on Non-standard budgets: bundles, rationing and quantity limits, part of Budget constraint and consumer equilibrium in Microeconomics.
Budget sets with bundled offers, tie-ins, quantity caps, block prices or liquidity constraints.
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Question from the DSE 2005 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.