Penelope utility function is U (a, b) = a+ 10b−b2, where a is the amount of apples consumed and b is the amount of bananas consumed. He has $100 income. The price of apple is $0.5 per lb. Price of banana’s though increases with its purchase. Specifically, buying, b pounds of bananas will cost Pedro b2. a. What is Penelope optimal consumption? b. Now, he suddenly a
Penelope utility function is U (a, b) = a+ 10b−b2, where a is the amount of apples consumed and b is the amount of bananas consumed. He has $100 income. The price of apple is $0.5 per lb. Price of banana’s though increases with its purchase. Specifically, buying, b pounds of bananas will cost Pedro b2. a. What is Penelope optimal consumption? b. Now, he suddenly a
Microeconomics A Contemporary Intro
10th Edition
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Author:MCEACHERN
Publisher:MCEACHERN
Chapter6: Consumer Choice And Demand
Section: Chapter Questions
Problem 13PAE
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Penelope utility function is U (a, b) = a+ 10b−b2, where a is the amount of apples
consumed and b is the amount of bananas consumed. He has $100 income. The
price of apple is $0.5 per lb. Price of banana’s though increases with its purchase.
Specifically, buying, b pounds of bananas will cost Pedro b2.
a. What is Penelope optimal consumption?
b. Now, he suddenly acquires an extra $100 income. How this will change
his allocation?
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