Casper consumes cocoa and cheese. Cocoa is sold in anunusualway.There is only one supplier,and the more cocoa you buy from him, the higher the priceyouhave to pay per unit. In fact y unitsof cocoa will cost Frank y2Ł. Cheese is sold in the usual way at a price of 2Łperunit.Casper'sincome is 30Ł and his utility function is U(x,y) = x^3 y^2where x is her consumption of cheese and yis his consumption of cocoa.(a) Sketch Casper's budget set and shade it in.(b) Sketch some of his indifference curves, compute andlabel the point that hechooses.

Let the price of cheese be Px = 2$ The price of cocoa be Py = y^2 $ Income = M = $30 Utility…

Answered: (a) Sketch Casper's budget set and…

(a) Sketch Casper's budget set and shade it in. (b) Sketch some of his indifference curves, compute and label the point that he chooses.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Revealed Preferences and Budget Constraint Analysis

Revealed means “Let Out,” and Preference means “Choice”; Choice Reveals Preference.

Question

Casper consumes cocoa and cheese. Cocoa is sold in an
unusual
way.
There is only one supplier,
and the more cocoa you buy from him, the higher the price
you
have to pay per unit. In fact y units
of cocoa will cost Frank y2
Ł. Cheese is sold in the usual way at a price of 2Ł
per
unit.
Casper's
income is 30Ł and his utility function is U(x,y) = x^3 y^2
where x is her consumption of cheese and y
is his consumption of cocoa.
(a) Sketch Casper's budget set and shade it in.
(b) Sketch some of his indifference curves, compute and
label the point that he
chooses.

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