Question

Adrian's utility function is given by...

SEE PICTURE IN COMMENTS. The questions are also in the comments. If anyone could help me out, that would be so appreciated! THANK YOU SO MUCH.

Answer 1

Here Ya+Yb=30....so Yb=30-Ya----->Substitute this adrains utility function U(Ya,Yb)=2Ya-(30-Ya)=Ya-30....Now to perform the project adrains utility function is greater than zero and in minimum case equal to 0....So Ya-30=0--->Ya=30

Answer 2

Now can u do this...initialaly Ya =10...so how much payment Adrain must be given =?

Answer 3

fifteen bucks? since he will be generating 30 bucks with his partner

Answer 4

No...To perform the project he needs 30 ...and intsially he has 10....so payment to be given=30-10=20

Answer 5

This is for the whole project?

Answer 6

Sorry, I'm a little confused.

Answer 7

yes..

Answer 8

whats the confusion

Answer 9

OK, got it. Now, the minimum payment is $20. But why would you calculate it for the whole project, not just for Adrian? And why would that be the minimum for her?

Answer 10

that would be minimum beacuse if you substitute that in adrain function it will make that function equal to zero

Answer 11

do u get it

Answer 12

Oh wait

Answer 13

I think I'm getting this. Let me just reread the comments really quick.

Answer 14

tell me if u have any doubts

Answer 15

I think I'm understanding it somewhat. I get the whole notion of setting the function in terms of Adrian. However, why would set the utility function to 30? It doesn't calculate the money he needs to earn, but quantifies his level of happiness.

Answer 16

Oh wait. Since they're indifferent, utility can be zero.

Answer 17

i have not set utility function to 30....but Ya+Yb=30...i.e project earnings...i just substitute Yb from this equation and put it in utility function

Answer 18

Sorry, why exactly would you do that substitution?

Answer 19

ahh... i m trying to get bored...maybe somebody else could explain

Answer 20

OK, thanks for your help then.

Answer 21

Your math is wrong. 2Ya-(30-Ya) does not equal Ya-30., but 3Ya-30.

Answer 22

maybe i messed up the calc...but you get the concept right or not...

Answer 23

Yes

Answer 24

If I do it your way and with the equation I derived, it evaluates to a minimum payment of zero.