Antonio likes to have coffee (C) and donuts (D) for breakfast every morning. He likes to dip his donuts into his coffee, so for every cup of coffee, he eats one and a half donuts. In economic terms, we can say he views one cup of coffee as a perfect complement to one and a half donuts. The price of a cup of coffee is $4.5 and the price of one donut is $2. His budget for breakfast this month is $75. (a) Write down a utility function that represents Antonio's preferences over (cups of) coffee (C) and donuts (D). (There may be many functions representing the same preferences, so you can choose either of them.) (b) How many cups of coffee (C) and donuts (D) is he going to consume? (Hint: the first order conditions will not help; draw the budget constraint and the indifference curves and look at the highest indifference curve that has a point in common with the budget constraint). (c) What is the exact value of Antonio's indirect utility for the utility function you chose in (a)?
Antonio likes to have coffee (C) and donuts (D) for breakfast every morning. He likes to dip his donuts into his coffee, so for every cup of coffee, he eats one and a half donuts. In economic terms, we can say he views one cup of coffee as a perfect complement to one and a half donuts. The price of a cup of coffee is $4.5 and the price of one donut is $2. His budget for breakfast this month is $75. (a) Write down a utility function that represents Antonio's preferences over (cups of) coffee (C) and donuts (D). (There may be many functions representing the same preferences, so you can choose either of them.) (b) How many cups of coffee (C) and donuts (D) is he going to consume? (Hint: the first order conditions will not help; draw the budget constraint and the indifference curves and look at the highest indifference curve that has a point in common with the budget constraint). (c) What is the exact value of Antonio's indirect utility for the utility function you chose in (a)?
Principles of Microeconomics
7th Edition
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter21: The Theory Of Consumer Choice
Section: Chapter Questions
Problem 1PA
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Transcribed Image Text:Antonio likes to have coffee (C) and donuts (D) for breakfast every morning. He likes to
dip his donuts into his coffee, so for every cup of coffee, he eats one and a half donuts. In
economic terms, we can say he views one cup of coffee as a perfect complement to one
and a half donuts. The price of a cup of coffee is $4.5 and the price of one donut is $2. His
budget for breakfast this month is $75.
(a) Write down a utility function that represents Antonio's preferences over (cups of)
coffee (C) and donuts (D). (There may be many functions representing the same
preferences, so you can choose either of them.)
(b) How many cups of coffee (C) and donuts (D) is he going to consume?
(Hint: the first order conditions will not help; draw the budget constraint and the indifference
curves and look at the highest indifference curve that has a point in common with the budget
constraint).
(c) What is the exact value of Antonio's indirect utility for the utility function you chose
in (a)?
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