Order the answer to: Subsistence Levels of Consumption: Suppose…
| Question | (a)When interpreted as a model of tastes such as those described in part A, what are the subsistence levels of x1 and x2? (b) How does this utility function treat tastes below subsistence levels? (c) What is the MRS when consumption is above subsistence levels? (d) Suppose that instead of water and food for someone poor in the developing world, we modeled calories from food (x1) and dollars spent on vacations (x2) for someone in the developed world (taking for granted that he is consuming his desired quantity of water). How would you modify the Stone-Geary utility function assuming that you still want to recognize the absence of tastes for food levels below subsistence? |
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| Subject | business economics |
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