Answer to Question #63414 in Microeconomics for iker
Household Goods (h). To be eligible for this discount, customers must pay an annual fee
a) Assuming strictly convex preferences, indicate with the use of an indifference curve
drawn within the axes below the fee £X which would make an individual indifferent
to the offer.
b) If the individual did become a customer at that fee and purchased h* units per year,
what would be the annual value, £dh*, to her of the discount? Show that this value is
greater than £X and explain your results
b) If the individual did become a customer at that fee and purchased h* units per year, then the annual value, £dh*, of the discount to her is X*h.
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