Suppose the Only Characteristic of Beer That a Consumer Cares

question 8

Essay

Suppose the only characteristic of beer that a consumer cares about is alcohol content.Currently, Bud Light and Miller Lite have the same alcohol content.
a.Using to denote ounces of Miller Lite and to denote ounces of Bud Light, what's the simplest possible utility function that can describe this consumer's tastes over the two products.
b.Suppose Bud Light lowers its alcohol content by 50%.How would you change the utility function to account for this?
c.Derive the MRS for the functions in (a) and (b) --- and interpret your answer.

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Definitions:

Board of Directors

A group of individuals elected by shareholders to oversee the management and governance of a corporation.

Dividend

A portion of a company's earnings which is paid to shareholders, usually on a quarterly basis.

Common Stock

A type of equity security that represents ownership in a corporation, giving holders voting rights and a share in profits through dividends.

Par Value

The nominal or face value of a bond, share of stock, or coupon as stated by the issuer.