Managerial Economics

Managerial Economics

Topic: Managerial Economics

 

Question 1

A)    To come with the utility function, we have to come with the come with the three unknown. The Ranking should be X, Location is Y and the price is Z. The three unknown, the utility function for both universities is as below.

USU’s utility function is 80X + 50Y + 45Z = $ 25000, UOP utility function is 70X + 70Y + 45Z = $25000. The utility function for USU, therefore will be U1= 80X + 50Y + 45Z- 25000= 0 and utility function for UOP is U2 = 70X + 70Y + 45Z- 25000 =0. If Roshima wants to keep her full time job, ranking is the most important variable to consider. The two functions will be differentiated subject to ranking to determine maximum utility. For USU, differentiation utility function subject to ranking is 80 while for UOP is 70. Therefore is she chooses to maintain her full time job, she has to study at Arizona State University.

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