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1. Jesper consumes granola (g) and whole milk (w). His utility function is u(g, w) = 2Vg+ 2 yw, and he has $120 to spend. Giant sells granola for $4 per pound and milk for $2 per gallon. Safeway sells granola for $2 per pound and milk for $4 per gallon. (i) Find the optimal bundle if Jesper shops at Giant. (ii) Find the optimal bundle if he shops at Safeway. (iii) Explain why the bundle Jesper purchases at Giant would cost more at Safeway, and vice versa. (iv) Suppose that Jesper can purchase from Sam's Club instead by paying an "entry fee," f, and then paying prices $1.50 for granola and $3 for milk. Under what conditions will Jesper choose to shop at Sam's Club? (Your answer will be an algebraic expression involving f.)

1. Jesper consumes granola (g) and whole milk (w). His utility function is u(g, w) = 2Vg+ 2 yw, and he has $120 to spend. Giant sells granola for $4 per pound and milk for $2 per gallon. Safeway sells granola for $2 per pound and milk for $4 per gallon. (i) Find the optimal bundle if Jesper shops at Giant. (ii) Find the optimal bundle if he shops at Safeway. (iii) Explain why the bundle Jesper purchases at Giant would cost more at Safeway, and vice versa. (iv) Suppose that Jesper can purchase from Sam's Club instead by paying an "entry fee," f, and then paying prices $1.50 for granola and $3 for milk. Under what conditions will Jesper choose to shop at Sam's Club? (Your answer will be an algebraic expression involving f.)

Economics (MindTap Course List)
Economics (MindTap Course List)
13th Edition
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Roger A. Arnold
Chapter20: Consumer Choice: Maximizing Utility And Behavioral Economics
Section: Chapter Questions
Problem 5WNG
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Please answer just the number IV part.

1. Jesper consumes granola (g) and whole milk (w). His utility function is u(g, w) = 2/g+ 2 yw, and he has $120 to spend. Giant sells granola for $4 per pound and milk for $2 per gallon. Safeway sells granola for $2 per pound and milk for $4 per gallon. %3D (i) Find the optimal bundle if Jesper shops at Giant. (ii) Find the optimal bundle if he shops at Safeway. (iii) Explain why the bundle Jesper purchases at Giant would cost more at Safeway, and vice versa. |(iv) Suppose that Jesper can purchase from Sam's Club instead by paying an "entry fee," f, |and then paying prices $1.50 for granola and $3 for milk. Under what conditions will Jesper choose to shop at Sam's Club? (Your answer will be an algebraic expression involving f.)
Transcribed Image Text:1. Jesper consumes granola (g) and whole milk (w). His utility function is u(g, w) = 2/g+ 2 yw, and he has $120 to spend. Giant sells granola for $4 per pound and milk for $2 per gallon. Safeway sells granola for $2 per pound and milk for $4 per gallon. %3D (i) Find the optimal bundle if Jesper shops at Giant. (ii) Find the optimal bundle if he shops at Safeway. (iii) Explain why the bundle Jesper purchases at Giant would cost more at Safeway, and vice versa. |(iv) Suppose that Jesper can purchase from Sam's Club instead by paying an "entry fee," f, |and then paying prices $1.50 for granola and $3 for milk. Under what conditions will Jesper choose to shop at Sam's Club? (Your answer will be an algebraic expression involving f.)
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