3. The utility that Elena receives by consuming food F and clothing C is given by U(F, C) = FC + F. Food costs £1 per unit, and clothing costs £2 per unit. Elena's income is £22. MUF = C+1 and MUc = F. (i) Define the term Marginal Rate of Substitution (MRS) (ii) Find the utility maximizing values of C and F for the numerical values given above (Hint: You can assume interior solution). (iii) Now suppose that price of C and Elena's income remain unchanged at £2 per unit and £22, respectively, while the price of F varies. Find the equation of the demand for F as a function of the unit price of F (PF).

3. The utility that Elena receives by consuming food F and clothing C is given by U(F, C) = FC + F. Food costs £1 per unit, and clothing costs £2 per unit. Elena's income is £22. MUF = C+1 and MUc = F. (i) Define the term Marginal Rate of Substitution (MRS) (ii) Find the utility maximizing values of C and F for the numerical values given above (Hint: You can assume interior solution). (iii) Now suppose that price of C and Elena's income remain unchanged at £2 per unit and £22, respectively, while the price of F varies. Find the equation of the demand for F as a function of the unit price of F (PF).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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