During Droughts,cities Often Impose Water Use Restrictions on Consumers

question 3

Essay

During droughts,cities often impose water use restrictions on consumers.Suppose a representative consumer has preferences for Water (W)and other goods (X)given by the utility function:
U(W,X)= WX.
Suppose the price of other goods is $1 and the price of water is initially 50¢.The consumer has a budget of $50/week.
a.How much water will the consumer purchase each week?
b.Suppose the government imposes a quota on water use of 50 units/week.Show that the quota reduces the representative consumer's utility.
c.By how much does the quota harm the representative consumer? Specifically,compute the equivalent variation of the quota.

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Definitions:

Sexual Interest

An inclination to behave sexually.

Genital Stimulation

The act of physically touching or applying pressure to the genital areas to achieve sexual arousal and possibly orgasm.

Satyriasis

An excessive or pathological sex drive in men, analogous to nymphomania in women.

Excessive Sexuality

An unusually high interest in or engagement in sexual activities, which may interfere with daily functioning or social relationships.