Ann consumes two goods, a and y. Her utility function is given by:u(x, y) = (x+1)G.The price of a is $4 per unit and the price of y is $ per unit. Ann's income is w.(a) *) Nrite down an expression for Ann's budget line.(b) v-'Determine the formula for Ann's marginal utility of a, and the formula forAnn's marginal utility of y.(c) (» For each income level w > 0 calculate Ann's optimal consumption bundle.(d)For which income levels w is bang-for-buck equalization violated at Ann'soptimal consumption bundle? Explain., Assume that w = 2. Draw Ann's budget line in a figure with r on the hor-izontal axis. Add 2 indifference curves of Ann, including the indifference curve thatcontains Ann's optimal consumption bundle. Indicate Ann's optimal consumption(e) -bundle.

“Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…

Ann consumes two goods, r and y. Her utility function is given by: u(x, y) = (x+1)VJ. The price of a is $4 per unit and the price of y is $ per unit. Ann's income is w. (a) * Nrite down an expression for Ann's budget line. Determine the formula for Ann's marginal utility of r, and the formula for (b) - Ann's marginal utility of y. (c) ( » For each income level w > 0 calculate Ann's optimal consumption bundle.

Ann consumes two goods, r and y. Her utility function is given by: u(x, y) = (x+1)VJ. The price of a is $4 per unit and the price of y is $ per unit. Ann's income is w. (a) * Nrite down an expression for Ann's budget line. Determine the formula for Ann's marginal utility of r, and the formula for (b) - Ann's marginal utility of y. (c) ( » For each income level w > 0 calculate Ann's optimal consumption bundle.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter10: Consumer Choice Theory

Section: Chapter Questions

Problem 8P

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Question

Ann consumes two goods, a and y. Her utility function is given by:
u(x, y) = (x+1)G.
The price of a is $4 per unit and the price of y is $ per unit. Ann's income is w.
(a) *
) Nrite down an expression for Ann's budget line.
(b) v-
'Determine the formula for Ann's marginal utility of a, and the formula for
Ann's marginal utility of y.
(c) (
» For each income level w > 0 calculate Ann's optimal consumption bundle.
(d)
For which income levels w is bang-for-buck equalization violated at Ann's
optimal consumption bundle? Explain.
, Assume that w = 2. Draw Ann's budget line in a figure with r on the hor-
izontal axis. Add 2 indifference curves of Ann, including the indifference curve that
contains Ann's optimal consumption bundle. Indicate Ann's optimal consumption
(e) -
bundle.

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