Question

118) Microelum g. If the ski resort owner eliminates the possibility of buying single ride lift tickets and instead sells only an all-day lift pass, entitling the skier to as many trips up the mountain as desired, what is the maximum price that could be charged (willingness to pay) without discouraging the skier from coming to the ski resort? Hint: The skier will pay the price up to where MU - zero; and MC (marginal cost) of additional skilin is zero per condition of as many lift as you ride at a single price. $72 b. 555 548 d $36 4. Consider the table below with information regarding the preference and utility pattern of Red Sox fan Bobby in purchasing Food and Beer while watching Red Sox game in Boston during baseball season. Consumption of Food Quantity TU MU 1 1 120 220 1300 Consumption of Sam Adams Beer Quantity TU M U 0 0 160 L 2 320 440 1 490 5 520 3 5 400 a. Estimate the MU values for both Food and Beer and fill out the blanks in MU columns. b. Suppose Bobby has $40 to spend in buying food or beer or both and the price of beer is 54 per bottle and $5 for Food/unit. What would be the best combination of beer and food for Booby to maximize his total utility (TU)? c. Suppose on another game day, Bobby found out that the beer price has gone up to $5 per bottle with no change in price of food. With new relative price, what will be the best combination of beer and food to maximize his TU? d. Using the answers from 4.2 and 4.3, draw the corresponding demand curve for beer in a graph. You may skip the complexity of drawing the Indifference Curve and tangency point. e. Are beer and food close substitute goods? How do you figure it out? (Hint: Use Price Elasticity of demand concept to calculate and apply the rule). TED MATERIAL

Answer 1

Consumption of food ay TO MU MulP comp upy mules cry TV 32 32 yfwp-On 120 no 300 360 400 120 100 80 GO 40 24 20 es 12 8 I 2 3 4 5 160 300 440 490 520 160 160 120 so 30 24 30 12.5 7.8 6 tot Can Pour = 4 Prood as Thus consume sumit of food & 4 unit of beer. should be consumed tu=40ot 490= 890 Penil of Burtos Thus again 4 unit of food & Gunt of Beer showedre consumed after B chanele consumed after price incross . P = 4then OB = 4 Pras den also Of = 4 Irucan in Price of been increases will lead to decrease in quantity of Food Thus Food & Beer are close substitute