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Microeconomics I: 1 Mini-Test Name: Student Number: Year 2012/2013 Class

Mateus enjoys going to the movies on Sundays and buying popcorn. His utility function is defined as U(x,y) = 5x + 2y, where x is movies and y is bags of popcorn. Mateus' mother gives him €24 each Sunday. Movies cost €5 each and popcorn is €2 per bag. Originally, Mateus' optimal choice is 4 movies and 2 bags of popcorn. However, with the new constraint that Mateus can only spend 4.5 hours in the theater, and each movie is 1.5 hours, his optimal choice becomes 3 movies and between 1.5 and 4.5 bags of popcorn, since all points in this range provide the same utility.

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29 views3 pages

Microeconomics I: 1 Mini-Test Name: Student Number: Year 2012/2013 Class

Mateus enjoys going to the movies on Sundays and buying popcorn. His utility function is defined as U(x,y) = 5x + 2y, where x is movies and y is bags of popcorn. Mateus' mother gives him €24 each Sunday. Movies cost €5 each and popcorn is €2 per bag. Originally, Mateus' optimal choice is 4 movies and 2 bags of popcorn. However, with the new constraint that Mateus can only spend 4.5 hours in the theater, and each movie is 1.5 hours, his optimal choice becomes 3 movies and between 1.5 and 4.5 bags of popcorn, since all points in this range provide the same utility.

Uploaded by

crod123456
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Microeconomics I

1st Mini-test
Name:

Year 2012/2013
Student number:

Class:

Mateus is a teenager who loves to go to the movie theater on Sundays. To properly enjoy the movies,
Mateus also needs to eat popcorns. His utility function is ,   
; 2, where  is the number
of movies and  the number of popcorn bags. Each time Mateus goes to the movie theater, his mother
gives him 24. The price of each movie is 5 and the price of each popcorn bag is 2.
a) Determine the optimal choice of Mateus and represent it graphically.
b) Determine the demand functions.

Mateus mother imposes that we only spend 4,5 hours in the movie theater each Sunday and each movie
lasts for 1,5 hours.
contraints what is going to be Mateus new choice? Represent it graphically.
c) Considering all the contraints,

Solutions:
a)
 ,   
; 2
. :     +  

!"

  !# %#

  2
$
&


    +       2 +  
"



 
!#$ %#&

Substituting   5,   2 and   24 in the demand function computed above we will have the
following optimal solution:
  4

 2
Graphically we have:
14
12
10
8
6
4
2
0
0

10

b) From the previous question we have the following demand functions:


  #

"

& %!#$

and   #

!"

& %!#$

c) With the time constraint imposed by Matheus mother he can only see a maximum of 3 movies
*4,5,1,5  3-.
By analyzing the graph below we see that the optimal condition is an interval.

14
12
10
8
6
4
2
0
0

So the new optimal choices are going to begin in the intersection point between the efficiency
line and the new time restriction.
  3
  3 


  2
  1,5

The new optimal choices are going to end in intersection between the budget constraint and the
new time restriction.

  3
  3
     3 
    +    
24  5 3 + 2
  4,5


Therefore the new optimal choice is such that   3 and  /1,5; 4,50, because all the points
in this interval provide the same utility and are along the active restriction.

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