1 Alice ¹ receives an allowance of 150 dollars a week for fish (which is an important share of her diet) that she spends on buying Salmon (S) and Tuna (T). The price of each pound of Salmon is 10 dollars and the price of each pound of Tuna is 5 dollars. Her utility is given by: U (S,T) = S +T (a) Find her marginal rate of substitution (MRS) between S and T. (b) Write down Alice's budget constraint. (c) Find Alice's optimal consumption and the value of λ at the optimum
1 Alice ¹ receives an allowance of 150 dollars a week for fish (which is an important share of her diet) that she spends on buying Salmon (S) and Tuna (T). The price of each pound of Salmon is 10 dollars and the price of each pound of Tuna is 5 dollars. Her utility is given by: U (S,T) = S +T (a) Find her marginal rate of substitution (MRS) between S and T. (b) Write down Alice's budget constraint. (c) Find Alice's optimal consumption and the value of λ at the optimum
Advanced Engineering Mathematics
10th Edition
ISBN:9780470458365
Author:Erwin Kreyszig
Publisher:Erwin Kreyszig
Chapter2: Second-order Linear Odes
Section: Chapter Questions
Problem 1RQ
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Transcribed Image Text:Alice ¹ receives an allowance of 150 dollars a week for fish (which is an important share of
her diet) that she spends on buying Salmon (S) and Tuna (T). The price of each pound of
Salmon is 10 dollars and the price of each pound of Tuna is 5 dollars. Her utility is given
by:
U (S, T) = S² + T²
(a) Find her marginal rate of substitution (MRS) between S and T.
(b) Write down Alice's budget constraint.
(c) Find Alice's optimal consumption and the value of λ at the optimum
(d) What is her new consumption if the price of tuna becomes 10 dollars?
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