2.3 Relating Utility Functions and Indifference Curve Maps Learning Objective 2.2: Identify utility functions based on the typical preferences they represent. 2.2 Utility Functions and Typical Preferences Learning Objective 2.1: Describe a utility function. What do you think would happen to the fuel consumption of all US motorists? Should the government expect fuel consumption and carbon emissions from cars to decrease by half in response? Why or why not? Suppose that the tax credit to subsidize hybrid car purchases is wildly successful and doubles the average fuel economy of all cars on US roads-a result that is clearly not realistic but useful for our subsequent discussions.We will then be able to use an appropriate utility function to derive indifference curves that describe our policy question. In this chapter, we will study utility and utility functions. We can apply the concept of utility to this policy question. Are there more effective approaches to reducing dependency on fossil fuels and carbon emissions? How do we decide which policy is best? To answer this question, policymakers need to predict with some accuracy how consumers will respond to this tax policy before these policymakers spend millions of federal dollars. This tax credit may seem like a good policy choice, but it is costly because it directly lowers the amount of revenue the US government collects. In 2005, Congress passed a law to provide consumers with tax credits toward the purchase of electric and hybrid cars. US residents and the government are concerned about the dependence on imported foreign oil and the release of carbon into the atmosphere. Is a tax credit on hybrid car purchases the government’s best choice to reduce fuel consumption and carbon emissions? 2 Utility “Fill ‘Er Up” by derekbruff is licensed under CC BY-NC 2.0 The Policy Question
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |