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(g) What the change in Ulrich's consumer surplus due to
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# Question : (g) What the change in Ulrich's consumer surplus due to : 10410

(g) What is the change in Ulrich's consumer surplus due to the tax? How much money did the government collect from Ulrich by means of the tax? Lolita, an intelligent and charming Holstein cow, consumes lculus 14.7 (1) only two goods, cow feed (made of ground corn and oats) and hay Her preferences are represented by the utility function U(z,y) z- 2/2+y, where r is her consumption of cow feed and y is her consumption of hay. d Lolita has been instructed in the mysteries of budgets and optimization and always maximizes her utility subject to her budget constraint. Lolita has an income of \$m that she is allowed to spend as she wishes on cow feed and hay. The price of hay is always \$1, and the price of cow feed will be denoted by p, where 0 p S 1. (a) Write Lolita's inverse demand function for cow feed. (Hint: Lolita's utility function is quasilinear. When y is the numeraire and the price of is p, the inverse demand function for someone with quasilinear utility f(z) y is found by simply setting p f (r).) (b) If the price of cow is p and her income is m, how much hay does lita choose? (Hint: feed doesn't spend on feed is used The that she to buy hay.) ug these numbers into her utility function to find out the utility (c) level that she enjoys at this price and this income

## Solution 5 (1 Ratings )

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Economics 9 Months Ago 288 Views