There are two goods in the world, pumpkins (x1), and apple cider (x2). Pumpkins are $2 each. Cider is $7 per gallon for the.first two gallons. After the second gallon, the price of cider drops to $4 per gallon. a. Peter's income is $54. Draw his budget line. Solve for the intercepts on the x1 and x2 axis and kink in the budget line. Show these in your graph. b. Peter's utility function is u(x1, x2) = x1 +3x2 Sketch some indifference curves in your graph. Find Peter's optimal consumption bundle (x1* x2* ) c. Paul's income is $22. Draw his budget line in a new graph. Solve for the intercepts on the x1 and x2 axes, and the kink in the budget line. Show these in your graph for Paul. d. Paul's utility function is u( x1 , x2) = min(3x1, 2x2). Sketch some indifference curves in your graph for Paul. Find Paul's optimal consumption bundle (x1* x2* )

There are two goods in the world, pumpkins (x1), and apple cider (x2). Pumpkins are $2 each. Cider is $7 per gallon for the.first two gallons. After the second gallon, the price of cider drops to $4 per gallon. a. Peter's income is $54. Draw his budget line. Solve for the intercepts on the x1 and x2 axis and kink in the budget line. Show these in your graph. b. Peter's utility function is u(x1, x2) = x1 +3x2 Sketch some indifference curves in your graph. Find Peter's optimal consumption bundle (x1* x2* ) c. Paul's income is $22. Draw his budget line in a new graph. Solve for the intercepts on the x1 and x2 axes, and the kink in the budget line. Show these in your graph for Paul. d. Paul's utility function is u( x1 , x2) = min(3x1, 2x2). Sketch some indifference curves in your graph for Paul. Find Paul's optimal consumption bundle (x1* x2* )

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter6: Consumer Choice Theory

Section6.A: Indifference Curve Analysis

Problem 3SQP

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