1) (15 points) A student has a lunch utility function U(S,P) = 8S + 3P, where S is the number of salads per month and P is the number of pizzas per month. The price of a salad is $5, the price of a pizza is 8, and his monthly income for lunch is $80. a) (5 pts.) Using the x-axis for S and the y-axis for P represent the indifference curves of the student corresponding to the levels of satisfaction U = 48, U = 72 U = 120. How does this student perceive pizzas and salads? b) (5 pts.) Find and draw the budget line of the student. Specify both the intercepts and the slope. In the same graphic, you should include the indifference curves from part (a). c) (5 pts.) Compute and represent graphically the equilibrium of the student (how many salads and pizzas he is likely to have per month). Your graph should include the budget line, the indifference curve, and the optimal consumption point.
1) (15 points) A student has a lunch utility function U(S,P) = 8S + 3P, where S is the number of salads per month and P is the number of pizzas per month. The price of a salad is $5, the price of a pizza is 8, and his monthly income for lunch is $80. a) (5 pts.) Using the x-axis for S and the y-axis for P represent the indifference curves of the student corresponding to the levels of satisfaction U = 48, U = 72 U = 120. How does this student perceive pizzas and salads? b) (5 pts.) Find and draw the budget line of the student. Specify both the intercepts and the slope. In the same graphic, you should include the indifference curves from part (a). c) (5 pts.) Compute and represent graphically the equilibrium of the student (how many salads and pizzas he is likely to have per month). Your graph should include the budget line, the indifference curve, and the optimal consumption point.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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