Nadia likes spare ribs, R, and Fried chicken, C. Her utility function is U(R,C) = 10R2C Her marginal utilities are MUR=20RC ? and MUC=10R2 Her weekly income is $90, which she spends on only ribs and chicken. A) If she pays $10 for a slab of ribs and $5 for a chicken, what is her optimal consumption bundle? Show that her budget line, indifference curve, and optimal bundle, e1, in a diagram. B) Suppose the price of chicken double s to $10. How does her optimal consumption of chicken and ribs change? Show her new budget line and optimal bundle, e2, in a diagram.
Nadia likes spare ribs, R, and Fried chicken, C. Her utility function is U(R,C) = 10R2C Her marginal utilities are MUR=20RC ? and MUC=10R2 Her weekly income is $90, which she spends on only ribs and chicken. A) If she pays $10 for a slab of ribs and $5 for a chicken, what is her optimal consumption bundle? Show that her budget line, indifference curve, and optimal bundle, e1, in a diagram. B) Suppose the price of chicken double s to $10. How does her optimal consumption of chicken and ribs change? Show her new budget line and optimal bundle, e2, in a diagram.
Chapter3: Preferences And Utility
Section: Chapter Questions
Problem 3.2P
Related questions
Question
Nadia likes spare ribs, R, and Fried chicken, C. Her utility function is U(R,C) = 10R2C
Her
and MUC=10R2
Her weekly income is $90, which she spends on only ribs and chicken.
A) If she pays $10 for a slab of ribs and $5 for a chicken, what is her optimal consumption bundle? Show that her budget line, indifference curve, and optimal bundle, e1, in a diagram.
B) Suppose the price of chicken double s to $10. How does her optimal consumption of chicken and ribs change? Show her new budget line and optimal bundle, e2, in a diagram.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 6 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:
9781337617383
Author:
Roger A. Arnold
Publisher:
Cengage Learning
