Question

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6. Problems 3.6 Many advertising slogans seem to be asserting something about people's preferences. How would you capture the following slogans with a mathematical utility function? Let m represent quantity of margarine and b represent quantity of butter. Let x represent the quantity of some other good. An advertising slogan that promises margarine is "just as good as butter" is equivalent to stating that Let c represent quantity of Coke. Let x represent the quantity of some other good. An advertising slogan that promises that "things go better with Coke" is equivalent to stating that given U(x,c), Let pr represent the quantity of Pringles chips. Let x represent the quantity of some other good An advertising slogan that claims that "You can't eat just one Pringles potato chip" is equivalent to stating that given U(x,pr), Let kk represent the quantity of Krispy Kreme doughnuts and dd represent Dunkin' Donuts. Let x represent the quantity of some other good An advertising slogan that claims that "Krispy Kreme glazed doughnuts are just better than Dunkin' Donuts" is equivalent to stating that Let m represent the quantity of Miller beers, with mresponsible is a responsible quantity of beers. Let x represent the quantity of some other good. An advertising slogan that states that "Miller Brewing advises us to drink (beer) 'responsibly'." is equivalent to stating that

Answer 1

Question 6)

1) U(m,b) = m + b

Since the two goods are perfect substitutes, bcoz one is as good as the other, so one is indifferent between consuming either of the good

2) U(c, x) = Min{ c,x }

Since other goods are better with coke, thus it implies that come should be jointly consumed with the other goods & hence c & x are complementary goods

3) since can't eat just one pr, thus at least 2 pr should be consumed with the other goods x,

So U(x,pr ) = Min { pr, 2x }

So that at eqm pr = 2x or pr/x = 2

With one x , at lest 2 pr should be taken

4) U( kk, dd ) = 2kk + dd

Thus additional utility is derived from kk than dd, though the two goods are perfect substitutes, MU from kk is always higher.

5) for any amount of m, m_responsible would provide more utility , thus for any given x,

U(m,x) < U ( m_responsible, x)

Thus beyond, m_ responsible, more is better doesn't hold

That is as long as ., m Is less than equal to m_ responsible, utility will rise, after that it will decrease.

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