Berries2015100 510 15 202530Nuts(f) Now let us explore a case where there is a "boundary solution." Sup-pose that the price of nuts is still 1 and the price of berries is 2, butAmbrose's income is only 9. Draw his budget line (in blue). Sketch theindifference curve that passes through the point (9, 0). What is the slopeof his indifference curve at the point (9,0)?(9) What is the slope of his budget line at this point?_(h) Which is steeper at this point, the budget line or the indifferencecurve?.(i) Can Ambrose afford any bundles that he likes better than the point(9,0)?- 5.3 (0) Ambrose, the nut and berry consumer, has a utility functionU(21,x2) = 4/T +x2, where ¤; is his consumption of nuts and r2 is hisconsumption of berries.%3D(a) The commodity bundle (25,0) gives Ambrose a utility of 20. Otherpoints that give him the same utility are (16, 4), (9, ), (4,-), (1, –), and (0, ). Plot these points on theaxes below and draw a red indifference curve through them.(b) Suppose that the price of a unit of nuts is 1, the price of a unit ofberries is 2, and Ambrose's income is 24. Draw Ambrose's budget linewith blue ink. How many units of nuts does he choose to buy?(c) How many units of berries?(d) Find some points on the indifference curve that gives him a utility of25 and sketch this indifference curve (in red).(e) Now suppose that the prices are as before, but Ambrose's income is34. Draw his new budget line (with pencil). How many units of nuts willhe choose?How many units of berries?

U(x1,x2) = 4x1+x2 MUx1=2x1MUx2=1

Answered: 5.3 (0) Ambrose, the nut and berry…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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