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.

Question

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.

Quizplus · Accepted Answer

The Answer of 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.

Suppose the Only Characteristic of Beer That a Consumer Cares