3. Consider a world with only two commodities, burger and hot dog. Assume their prices are PB, PH and income is m. (a) Assuming PB = 3,Pµ = 12 and m = 125, draw Budget Constraint. (b) Brenda buys her commodities from a local shop. Due to its limited storage shop owner does not want to sell high amounts. So, Owner comes up with the following price schedule: If a buyer demands more than 5, for each additional unit price of the commodity x (B or H) becomes Px +1 dollar. Draw Brenda's new budget Constraint. (c) Assume Brenda's utility function is UBrenda (B, H) = -(B-5)² - (H-6)². Now, show her indifference curves and find her optimal bundle(s) for the given budget constraint in (b).
3. Consider a world with only two commodities, burger and hot dog. Assume their prices are PB, PH and income is m. (a) Assuming PB = 3,Pµ = 12 and m = 125, draw Budget Constraint. (b) Brenda buys her commodities from a local shop. Due to its limited storage shop owner does not want to sell high amounts. So, Owner comes up with the following price schedule: If a buyer demands more than 5, for each additional unit price of the commodity x (B or H) becomes Px +1 dollar. Draw Brenda's new budget Constraint. (c) Assume Brenda's utility function is UBrenda (B, H) = -(B-5)² - (H-6)². Now, show her indifference curves and find her optimal bundle(s) for the given budget constraint in (b).
Chapter6: Consumer Choice And Demand
Section: Chapter Questions
Problem 1.3P
Related questions
Question
Transcribed Image Text:3. Consider a world with only two commodities, burger and hot dog. Assume their prices are PB, PH and
income is m.
(a) Assuming PB = 3,Pµ = 12 and m = 125, draw Budget Constraint.
(b) Brenda buys her commodities from a local shop. Due to its limited storage shop owner does not want
to sell high amounts. So, Owner comes up with the following price schedule: If a buyer demands
more than 5, for each additional unit price of the commodity x (B or H) becomes Px +1 dollar. Draw
Brenda's new budget Constraint.
(c) Assume Brenda's utility function is UBrenda (B, H) = -(B-5)² - (H-6)². Now, show her indifference
curves and find her optimal bundle(s) for the given budget constraint in (b).
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