3. Andy purchases only two goods, apples (a) and kumquats (k). He has an income of $40 and can buy apples at $2 per pound and kumquats at $4 per pound. His utility function is U(a,k) = 5a + 3k. %3D a. Draw Andy's budget line with apples on the x-axis and kumquats on the y-axis. b. What is his marginal utility for apples and his marginal utility for kumquats? What is his MRS? c. Draw some of Andy's indifference curves (you don't need to put bundles or utility numbers on the indifference curves, just be careful with the slope). What bundle of apples and kumquats will Andy purchase to maximize his utility? Show the optimal bundle on your diagram. d. Find Andy's demand function for apples for general I, Pa and Pk.

Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter20: Consumer Choice And Elasticity
Section: Chapter Questions
Problem 4CQ
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3. Andy purchases only two goods, apples (a) and kumquats (k). He has an income of $40 and can buy
apples at $2 per pound and kumquats at $4 per pound. His utility function is
U(a,k) = 5a + 3k.
%3D
a. Draw Andy's budget line with apples on the x-axis and kumquats on the y-axis.
b. What is his marginal utility for apples and his marginal utility for kumquats? What is his MRS?
c. Draw some of Andy's indifference curves (you don't need to put bundles or utility numbers on the
indifference curves, just be careful with the slope). What bundle of apples and kumquats will Andy
purchase to maximize his utility? Show the optimal bundle on your diagram.
d. Find Andy's demand function for apples for general I, Pa and Pk.
Transcribed Image Text:3. Andy purchases only two goods, apples (a) and kumquats (k). He has an income of $40 and can buy apples at $2 per pound and kumquats at $4 per pound. His utility function is U(a,k) = 5a + 3k. %3D a. Draw Andy's budget line with apples on the x-axis and kumquats on the y-axis. b. What is his marginal utility for apples and his marginal utility for kumquats? What is his MRS? c. Draw some of Andy's indifference curves (you don't need to put bundles or utility numbers on the indifference curves, just be careful with the slope). What bundle of apples and kumquats will Andy purchase to maximize his utility? Show the optimal bundle on your diagram. d. Find Andy's demand function for apples for general I, Pa and Pk.
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