1. Alice has a monthly lunch budget of 360 dollars which she spends on either burgers (B) or pizza (Z). The price of each pizza is 16 dollars and the price of each burger is 8 dollars. Alice's utility is given by: U (B, Z) = B'/2 +4Z\/2 (a) Find Alice's budget constraint. (b) Set up the Lagrangian and find her optimal consumption. (c) What is her new consumption if the price of burgers becomes 16 dollars?

1. Alice has a monthly lunch budget of 360 dollars which she spends on either burgers (B) or pizza (Z). The price of each pizza is 16 dollars and the price of each burger is 8 dollars. Alice's utility is given by: U (B, Z) = B'/2 +4Z\/2 (a) Find Alice's budget constraint. (b) Set up the Lagrangian and find her optimal consumption. (c) What is her new consumption if the price of burgers becomes 16 dollars?

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter6: Consumer Choice Theory

Section6.A: Indifference Curve Analysis

Problem 1SQP

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1 Alice has a monthly lunch budget of 360 dollars which she spends on either burgers (B) or pizza (Z). The price of each pizza is 16. dollars and the price of each burger is 8 dollars. Alice's utility is given by: u(B, Z) = B'/2 +4Z!/2 + 47!/2 a) Find Alice's budget constraint. Set up the Lagrangian and find her optimal consumption. What is her new consumption if the price of burgers becomes 16 dollars?
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1 Consider a consumer who consumes only two goods, 21 and z2. His utility function is u (21, 22) = In z1 + 2. where In represents the natural logarithm. 1.a Derive the consumer's MRS of good 1 for good 2 using calculus to calculate his marginal utility from z and his marginal utility from z2. 1.b If the price of z1 is $2 per unit and the price of z2 is $4 per unit, and the consumer's income is $100, What is the equation of this consumer's budget line? 1.c What are the optimal consumption choices, z and z5, for this consumer? Show your work.
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PLEASE HELP ME ANSWER IT AS FAST AS YOU CAN Dalal consumes only two goods for lunch and dinner: risotto (R) and lamb machboos (M). Dalal’s utility function isgiven by U(R,M) = R + 4M. Suppose that a risotto dish costs 3 KD and that a dish of lamb machboos costs 6 KD.Dalal has 300 KD a month to spend on her lunch and dinner meals. a. How many risotto and lamb machboos dishes will Dalal buy each month if she maximizes utility?Dalal’s brother, Jassem, wants to make her happier and is considering two options: giving her a 60 KD gift card that can only be spent on risotto from one of the Italian restaurants or giving her some cash money.If Jassem chooses to give Dalal the 60 KD risotto gift card:b. How many risotto meals can Dalal add to her optimal basket? c. What utility level will Dalal get given her income and the risotto gift card?Suppose that Jassem instead chooses the second option and promises Dalal to raise her income to the level thatensures making her as happy as the first…
EXERCISE 7 Aisha is considering how to allocate the next 6 hours of her free time. She could choose between leisure (L) and helping her neighbour with the house chores. If she decides to help her neighbour, she is going to get paid at £25 per hour, which she can then spend on her favourite pizza (P). Suppose the price of pizza is £12.50. Aisha's preferences for leisure and pizza are given by the following utility function: U(L, P) = 3L + P. (MU₁ = 3, MUp = 1). a) Write down Aisha's budget equation and draw the corresponding budget line. Clearly label the axes and calculate the coordinates of the points of intersection of the budget line with each axis. b) Calculate Aisha's marginal rate of substitution between leisure and pizza. Explain the concept of MRS and interpret the figure obtained. c) Find Aisha's optimal consumption bundle, both algebraically and graphically. Explain your reasoning. d) Would Aisha's optimal choice change if she could get a discount on her pizza purchases so…