1. Paul derives utility from cups of coffee (C) and donuts, which he eats a dozen at a time (D). His utility function is: U=√C.D a. Sketch Paul's indifference curves for U-5, U-10 and U=20. b. Suppose Paul has $200 to spend and that a cup of coffee costs $5 and a dozen donuts costs $20. Draw Paul's budget constraint on the same graph as his indifference curves. c. Suppose Paul spends all of his income on donuts. How many dozen can he buy and what is his utility?

1. Paul derives utility from cups of coffee (C) and donuts, which he eats a dozen at a time (D). His utility function is: U=√C.D a. Sketch Paul's indifference curves for U-5, U-10 and U=20. b. Suppose Paul has $200 to spend and that a cup of coffee costs $5 and a dozen donuts costs $20. Draw Paul's budget constraint on the same graph as his indifference curves. c. Suppose Paul spends all of his income on donuts. How many dozen can he buy and what is his utility?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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