Question

In: Economics

Trigleater is a hungry individual in the Grossman model deciding what to have for dinner is...

Trigleater is a hungry individual in the Grossman model deciding what to have for dinner is looking at variable options. Trigleater has a special condition called "Eaterblood" where whatever she eats will affect her health almost immediately.

The following table reflects the options she is considering and the effect on health

Meal Home Good Z Health H

Steak and eggs +9 -4

Kale salad and broccoli -5 +18

Double cheeseburger deluxe with coke 12 -18

A miracle pill "Actosfast" is discovered that halves the negative health impact of food. What would the new choice be

If Trigleater's single period utility function is given by U=5Z+2H and she can only select one item from the table above,

what would be her total utility after selecting the optimal meal

A.

Steak and eggs

 B.

Kale salad with broccoli

 C.

Double Cheeseburger Deluxe with coke

 D.

Will not eat

Solutions

Expert Solution

Meal Good Health
Steak and eggs 9 -4
Kale salad with broccoli -5 18
Double Cheeseburger with cola 12 -18

The utility function is 5Z+2H

After the discovery of the the pill the utilities for each meal become

Meal Utility
Steak and eggs 9*5 - 4=41
Kale salad with broccoli -5*5+2*18=11
Double Cheeseburger with cola 12*5-18= 42

The highest utility after deduction of the negative effect of health is derived from double cheeseburger with cola so she will choose this as her optimal utility.

Rahul Sunny answered 2 years ago
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