Tracy consumes dress shoes (D) and casual Crocs (C). Her marginal utility fromconsuming casual Crocs is MU 20DC and her marginal utility from consumingdress shoes is MU= 10C2. Her annual shoe allowance is $360, which she spends8-on only dress shoes and Crocs7-U2If she pays $40 for a pair of dress shoes and $40 for a pair of Crocs, what is heroptimal consumption bundle?в-pairs of Crocs andpairs ofTracy's satisfaction-maximizing bundle containsdress shoes. (Enter your responses using integers.)3-2-1-0-02461012141618CrоcsDress shoes99

Question
Asked Oct 22, 2019
Tracy consumes dress shoes (D) and casual Crocs (C). Her marginal utility from
consuming casual Crocs is MU 20DC and her marginal utility from consuming
dress shoes is MU
= 10C2. Her annual shoe allowance is $360, which she spends
8-
on only dress shoes and Crocs
7-
U2
If she pays $40 for a pair of dress shoes and $40 for a pair of Crocs, what is her
optimal consumption bundle?
в-
pairs of Crocs andpairs of
Tracy's satisfaction-maximizing bundle contains
dress shoes. (Enter your responses using integers.)
3-
2-
1-
0-
0
2
4
6
10
12
14
16
18
Crоcs
Dress shoes
99
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Tracy consumes dress shoes (D) and casual Crocs (C). Her marginal utility from consuming casual Crocs is MU 20DC and her marginal utility from consuming dress shoes is MU = 10C2. Her annual shoe allowance is $360, which she spends 8- on only dress shoes and Crocs 7- U2 If she pays $40 for a pair of dress shoes and $40 for a pair of Crocs, what is her optimal consumption bundle? в- pairs of Crocs andpairs of Tracy's satisfaction-maximizing bundle contains dress shoes. (Enter your responses using integers.) 3- 2- 1- 0- 0 2 4 6 10 12 14 16 18 Crоcs Dress shoes 99

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Expert Answer

Step 1

The budget line is the locus point of all the different combinations of two goods that the consumer can consume from the disposable income that he has based on the prices of the goods. Thus, the different combinations of two goods that can be purchased with the income of the individual will be indicated along with a curve and that curve is known as the budget line. The indifference curve on the other hand is the graphical representation of the different combinations of two goods which provides the same level of satisfaction to the consumer. Since the level of satisfaction is the same at all the points on the indifference curve, the consumer will be indifferent amongst them.

Step 2

The optimal point of consumption of the two goods by the individual can be calculated at the point of tangency of the budget line with eth indifference curve. This point is the optimal consumption bundle point at which the consumer can maximize the utility and at the given income of the individual. The point of tangency is obtained at the point where the slope of the budget line is equal to the slope of the indifference curve. They are equal at the point of tangency.

Step 3

The slope of the budget line and the slope of the indifference curves can be calculated and they ...

Slope of Indifference curve =Slope of budget line
PC MUC
Р. MUp
20DC 40
10C2 40
2D C
A
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Slope of Indifference curve =Slope of budget line PC MUC Р. MUp 20DC 40 10C2 40 2D C A

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