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I Have Been Saving My Money to Buy a New $22,000\$ 22,000

Question 30

Multiple Choice

I have been saving my money to buy a new car. I know that I want to buy a Prius and that it will cost about $22,000\$ 22,000 . My refrigerator has been malfunctioning too, so any left over money will go towards repairs. My utility function can be written as U(x,p,ε) =x+z(p,ε) U(x, p, \varepsilon) =x+z(p, \varepsilon) , where x=1\mathrm{x}=1 if I\mathrm{I} buy the Prius and 0 otherwise, p\mathrm{p} is the price of the Prius and ε\varepsilon is my reference point. Which of the following functions for z(p,ε) z(p, \varepsilon) best describes the scenario above?


A) z(p,ε) =(22,000p) z(p, \varepsilon) =(22,000-p) .
B) z(p,ε) =p22,000z(p, \varepsilon) =|p-22,000| .
C) z(p,e) =xpz(p, e) =|x-p| .
D) z(p,e) =(xp) 2z(p, e) =(x-p) ^{2} .

Correct Answer:

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