2 COLD BREW VS. ICED COFFEE Lauren's preferences over cold brew, C, and iced coffee, I, are given by the following utility function: U(C, I)=C+I a. Plot indifference curves associated with U = 5, U = 10, and U = 15. b. Calculate Lauren's marginal rate of substitution (MRS) at the bundles (C=3,1=1) and (C=1,I=3). What does this imply about Lauren's preferences in words? c. Suppose Lauren's brother Christopher has preferences over cold brew and iced coffee that is given by the following utility function: U(C, I)=√C+I Redo parts (a) and (b) using Christopher's utility function. What changes, if anything? Ex- plain.
2 COLD BREW VS. ICED COFFEE Lauren's preferences over cold brew, C, and iced coffee, I, are given by the following utility function: U(C, I)=C+I a. Plot indifference curves associated with U = 5, U = 10, and U = 15. b. Calculate Lauren's marginal rate of substitution (MRS) at the bundles (C=3,1=1) and (C=1,I=3). What does this imply about Lauren's preferences in words? c. Suppose Lauren's brother Christopher has preferences over cold brew and iced coffee that is given by the following utility function: U(C, I)=√C+I Redo parts (a) and (b) using Christopher's utility function. What changes, if anything? Ex- plain.
Chapter3: Preferences And Utility
Section: Chapter Questions
Problem 3.4P
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Transcribed Image Text:2 COLD BREW VS. ICED COFFEE
Lauren's preferences over cold brew, C, and iced coffee, I, are given by the following utility
function:
U(C, I)=C+I
a. Plot indifference curves associated with U = 5, U = 10, and U = 15.
b. Calculate Lauren's marginal rate of substitution (MRS) at the bundles (C=3,1=1) and (C=1,I=3).
What does this imply about Lauren's preferences in words?
c. Suppose Lauren's brother Christopher has preferences over cold brew and iced coffee that
is given by the following utility function:
U(C, I)=√C+I
Redo parts (a) and (b) using Christopher's utility function. What changes, if anything? Ex-
plain.
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