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Harriet enjoys watching both American Idol and Desperate Housewives on television.

This question was answered on Jan 27, 2013. View the Answer
3. Harriet enjoys watching both American Idol and Desperate Housewives on
television. Her preferences correspond to the utility function U(A,D) = 2A + 4√D, where A
stands for the number of hours she watches American Idol and D is the number of hours she
watches Desperate Housewives.
a. How would Harriet rank the following alternatives: 4 hours of American Idol and 2 hours
of Desperate Housewives, 2 hours of American Idol and 4 hours of Desperate Housewives
and 3 hours of American Idol and 3 hours of Desperate Housewives?
b. Suppose that one week, Desperate Housewives is not shown, but there is a two-hour
American Idol special (instead of the usual one-hour program). Is Harriet better off or worse
off? Explain.
c. Would Harriet's preferences change if her utility function was expressed as U(A,D) = 2A +
4√D+6? Why or why not?

4. Nicole's income is $1,000 per month. She spends all of it on shoes (S) and books
(B). Shoes cost $50 and books cost $25. Her marginal rate of substitution for shoes with
books is MRSSB = 2B/3S. Illustrate her utility-maximizing combination of shoes and books
and draw her price-consumption curve if the price of books rises to $30
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. Harriet enjoys watching both American Idol and Desperate Housewives on
television. Her preferences correspond to the utility function U(A,D) = 2A + 4√D, where A
stands for the number of hours...

This question was asked on Jan 27, 2013 and answered on Jan 27, 2013.

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