Consider Jen,a Consumer with Preferences U(H,F)= F^1/3H^2/3,where H Is the Quantity

question 113

Essay

Consider Jen,a consumer with preferences U(H,F)= F^1/3H^2/3,where H is the quantity of housing and F is the quantity of food (per month).Suppose Jen has a stipend of $600/month which she uses to purchase food at a price of $1/unit and housing at a price of $10/unit.
a.Compute Jen's utility-maximizing bundle of goods.
b.Suppose that Jen's employer subsidizes housing by paying 50% of her total housing costs,thereby effectively lowering the price Jen pays for housing to $5/unit.Compute Jen's new optimal consumption bundle.
c.How much does Jen's employer pay in total for this subsidy? How much utility does Jen enjoy with this subsidy (compute her utility at the optimal bundle).
d.Suppose that her employer simply gave Jen the dollar cost you found in (c)as a lump sum (instead of subsidizing housing).Will Jen gain a higher utility from the housing subsidy or the lump-sum equivalent transfer?

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Definitions:

Directly Reabsorb

A process in which substances are taken back into the blood from the filtrate in the kidney tubules without undergoing any transformation.

Nephron

The functional, microscopic unit of the vertebrate kidney.

Peritubular Capillaries

In the mammalian kidney, a capillary network that surrounds each renal tubule; receives blood from the efferent arterioles.

Ureters Connect

The function of ureters is to transport urine from the kidneys to the bladder, facilitating urinary excretion.