= 8. Jane lives in a dormitory that offers soft drinks and chips for sale in vending machines. Her utility function is U 3SC (where S is the number of soft drinks per week and C the number of bags of chips per week), so her marginal utility of S is 3C and her marginal utility of C is 3S. Soft drinks are priced at £0.50 each, chips £0.25 per bag. a. Write an expression for Jane's marginal rate of substitution between soft drinks and chips. b. Use the expression generated in part (a) to determine Jane's optimal mix of soft drinks and chips. c. If Jane has £5.00 per week to spend on chips and soft drinks, how many of each should she purchase per week?
= 8. Jane lives in a dormitory that offers soft drinks and chips for sale in vending machines. Her utility function is U 3SC (where S is the number of soft drinks per week and C the number of bags of chips per week), so her marginal utility of S is 3C and her marginal utility of C is 3S. Soft drinks are priced at £0.50 each, chips £0.25 per bag. a. Write an expression for Jane's marginal rate of substitution between soft drinks and chips. b. Use the expression generated in part (a) to determine Jane's optimal mix of soft drinks and chips. c. If Jane has £5.00 per week to spend on chips and soft drinks, how many of each should she purchase per week?
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter6: Consumer Choice Theory
Section: Chapter Questions
Problem 3SQP
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Transcribed Image Text:8. Jane lives in a dormitory that offers soft drinks and chips for sale in vending
machines. Her utility function is U 3SC (where S is the number of soft
drinks per week and C the number of bags of chips per week), so her
marginal utility of S is 3C and her marginal utility of C is 3S. Soft drinks are
priced at £0.50 each, chips £0.25
per bag.
a. Write an expression for Jane's marginal rate of substitution between
soft drinks and chips.
b. Use the expression generated in part (a) to determine Jane's optimal
mix of soft drinks and chips.
c. If Jane has £5.00 per week to spend on chips and soft drinks, how
many of each should she purchase per week?
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