Having missed an opportunity with the recent vampire craze created by the Twilight series, Mattel has offered a new product targeted at younger kids than their competitors: the Vampire Teddy Bear. The...

I have this assignment, I have started it but not sure if I'm doing it correctly, and don't know how to find all the criteria.


Having missed an opportunity with the recent vampire craze created by the Twilight series, Mattel has offered a new product targeted at younger kids than their competitors: the Vampire Teddy Bear. The Vampire Teddy Bear is a small, fluffy bear with two plastic fangs that (safely, according to Mattel) drill into the child's neck. Mattel, is planning a blitz marketing campaign emphasizing that the more bears you buy for your child the longer they will stay silent (because of their extreme satisfaction with the bear). In fact, they provide an equation in the commercial (the marketing director is on vacation and the chief economist has been pitching in): Minutes of Silence=Number of Bears∗20 Assuming this message penetrates the parenting market equally and there isn't a diminishing return on silence from a child, should Mattel be concerned with income distribution?  To make it simple, consider an economy with just two consumers. Hint: Express the consumer's utility as something like: U=X^α+B Where X is the number of other goods and B is the number of bears.  Make sure to explain in your essay why this is representative of the problem. Instead of assuming income for each consumer is I, express it as a percent of the total.  For instance consumer one's income could be described as: (γ)Y Where gamma is a number between zero and one and Y is the total income in the economy.  Similarly, consumer two's income could be defined as: (1−γ)Y Make sure to consider both the case when the low income individual is at a corner solution and an interior solution. Criteria: 1. Setup the interior solution problem correct 2. Solved the individual interior problem correctly for the individual consumer 3. Summed the demand for the two individuals to find demand for bears 4. Properly described how additional income will impact the 'rich' and 'poor' consumer at a corner solution 5. Showed the summed demand of the two consumers depends on income distribution 6. Properly interpret the aforementioned sections