4. There are two goods in the world, pumpkins (x), and apple cider (r2). Pumpkins are $2 each. Cider is $7 per gallon for the first two gallons. After the second gallon, the price of cider drops to $4 per gallon. (a) Peter's income is $54. Draw his budget line. Solve for the intercepts on the r1 and r2 axes, and the kink in the budget line. Show these in your graph. (b) Peter's utility function is u(x1,x2) = x+3x2. Sketch some indifference curves in your graph. Find Peter's optimal consumption bundle (r*,r;). (c) Paul's income is $22. Draw his budget line in a new graph. Solve for the intercepts on the r and x2 axes, and the kink in the budget line. Show these in your graph for Paul. (d) Paul's utility function is u(x1,x2) ence curves in your graph for Paul. Find Paul's optimal consumption bundle (x, x3). min(3.r1, 2.r2). Sketch some indiffer- %3D

4. There are two goods in the world, pumpkins (x), and apple cider (r2). Pumpkins are $2 each. Cider is $7 per gallon for the first two gallons. After the second gallon, the price of cider drops to $4 per gallon. (a) Peter's income is $54. Draw his budget line. Solve for the intercepts on the r1 and r2 axes, and the kink in the budget line. Show these in your graph. (b) Peter's utility function is u(x1,x2) = x+3x2. Sketch some indifference curves in your graph. Find Peter's optimal consumption bundle (r*,r;). (c) Paul's income is $22. Draw his budget line in a new graph. Solve for the intercepts on the r and x2 axes, and the kink in the budget line. Show these in your graph for Paul. (d) Paul's utility function is u(x1,x2) ence curves in your graph for Paul. Find Paul's optimal consumption bundle (x, x3). min(3.r1, 2.r2). Sketch some indiffer- %3D

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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