Utility of a consumer is . His income is , and the price of good 2 is 1. There are two available price schemes for good 1: (i) per unit price 2, and (ii) a reduced per unit price together with a fixed fee . A consumer would be indifferent between the schemes if:
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Utility of a consumer is u(x₁,x₂)=min {x₁,x₂}. His income is M, and the price of good 2 is 1. There are two available price schemes for good 1: (i) per unit price 2, and (ii) a reduced per unit price 2-θ together with a fixed fee T. A consumer would be indifferent between the schemes if: (A) θ=2T/M (B) θ=3T/M (C) θ=T/M (D) θ=(T+1)/M
Also written as: Utility of a consumer is u(x_1,x_2)=min {x_1,x_2}. His income is M, and the price of good 2 is 1. There are two available price schemes for good 1: (i) per unit price 2, and (ii) a reduced per unit price 2-theta together with a fixed fee T. A consumer would be indifferent between the schemes if:
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 2013 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.