Suppose That the Preferences a Typical American Has for Quantities

question 112

Essay

Suppose that the preferences a typical American has for quantities of electricity (E)and gasoline (G)is given by
U(E,G)= a ln(E)+ (1 - a)ln(G)
where 0 < a < 1.Suppose the prices of gasoline and electricity in the units provided are both $1/unit and the consumer has an income of $100.Suppose in addition,the government has chosen to ration electricity by allowing a maximum consumption of 50 units of electricity (E ≤ 50).
a.If a = .25,find the optimal consumption bundle of gasoline and electricity.Does the electricity rationing constraint have an influence on consumer's choice?
b.If a = .75,find the optimal consumption bundle of gasoline and electricity.Does the electricity rationing constraint of the government have an influence on the consumer?

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Definitions:

Logical Connections

The connections between entities that are governed by logic, typically in the context of computer science and digital circuits.

Ladder Diagrams

A graphical representation of electrical logic circuits used in programming PLCs and designing electrical circuits.

Physical Connections

The tangible points of contact where devices, components, or systems are mechanically coupled or connected together.

Circuit Components

Individual parts or elements within an electrical circuit, such as resistors, capacitors, and inductors.