4.3 (0) Burt's utility function is U (x₁, x₂) = (x1 + 2)(x2 + 6), where x₁ is the number of cookies and 2 is the number of glasses of milk that he consumes.
4.3 (0) Burt's utility function is U (x₁, x₂) = (x1 + 2)(x2 + 6), where x₁ is the number of cookies and 2 is the number of glasses of milk that he consumes.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:4.3 (0) Burt's utility function is U (x₁, x₂) = (x1 + 2)(x2 + 6), where x₁
is the number of cookies and 2 is the number of glasses of milk that he
consumes.
consuming the bundle (4, 6)?__
(a) What is the slope of Burt's indifference curve at the point where he is
Use pencil or black ink to draw
a line with this slope through the point (4,6). (Try to make this graph
fairly neat and precise, since details will matter.) The line you just drew
is the tangent line to the consumer's indifference curve at the point (4, 6).
(b) The indifference curve through the point (4,6) passes through the
points
,0), (7, - ), and (2,
). Use blue ink to
sketch in this indifference curve. Incidentally, the equation for Burt's
indifference curve through the point (4,6) is 2 =
=
Glasses of milk
16
wise decision?
on your graph.
12
4
0 4 8
12 16
Cookies
(c) Burt currently has the bundle (4,6). Ernie offers to give Burt 9
glasses of milk if Burt will give Ernie 3 cookies. If Burt makes this trade,
Burt refuses to trade. Was this a
he would have the bundle
Mark the bundle (1,15)
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