a)
To find: Quantity of Twinkies and soda that maximizes utility.
a)
Explanation of Solution
Therefore, to maximize utility there should be 5 Twinkie and 2 soda.
b)
To find: The calculation of new allowance.
b)
Explanation of Solution
After inserting the t and s function in the budget constraint:
The allowance should increase from $ 1 to $2.
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Chapter 4 Solutions
Microeconomic Theory
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