John currently lives in Sydney where he earns $2700 a week as a high school principal. If he moves to Batemans Bay, he has to accept a position as a classroom teacher where he will earn $2100 a week. John only considers two goods, cost of living (c) and health (h). In Sydney, Pc = 54 and ph = 90. In Batemans Bay, Ph = 36. John's utility function is u(c, h) = h + cihi. 1 a) What is John's optimal consumption of h in Sydney? b) What would be John's optimal consumption of c in Batemans Bay? c) What is the maximum cost of living ph such that John will accept to move to Batemans Bay?
John currently lives in Sydney where he earns $2700 a week as a high school principal. If he moves to Batemans Bay, he has to accept a position as a classroom teacher where he will earn $2100 a week. John only considers two goods, cost of living (c) and health (h). In Sydney, Pc = 54 and ph = 90. In Batemans Bay, Ph = 36. John's utility function is u(c, h) = h + cihi. 1 a) What is John's optimal consumption of h in Sydney? b) What would be John's optimal consumption of c in Batemans Bay? c) What is the maximum cost of living ph such that John will accept to move to Batemans Bay?
Chapter10: Consumer Choice Theory
Section: Chapter Questions
Problem 6P
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