msedge_1rGM186trb

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School

University of Nairobi *

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Course

MANAGERIAL

Subject

Economics

Date

Nov 24, 2024

Type

png

Pages

1

Uploaded by BarristerAlpacaMaster698

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Question 3 2 points Save Answer Jasper utility function for beer and pizza can be expressed as: UB.P) = BxP Suppose beer costs S5 per grass. pizzas cost S10 each, and Jasper has a total of $30 to spend. Assume Jaspeer is allowed to purchase fractional amounts of each good. Part A) Based on the above information, what is Jaspeer's optimal amount of beer? Enter the number below. Beer=| 3 glasses Part B) Now suppose the price of beer falls from $5 down to $3. Calculate the following and fill in the blanks below. When necessary, round answers to two places after the decimal. (Hint: find the decomposition basket to calculate the substitution and income effects). Jasper's total effect on beer is to increase total consumption by glasses of beer. Jasper's substitution effect is to increase beer consumption by glasses of beer. Jasper's income effect is 1o increase beer by glasses of beer.
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