Answered: a. What is Julio's MRSFe (marginal rate…

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter6: Consumer Choice And Demand

Section: Chapter Questions

Problem 2QFR

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5. Julio who consumes two goods Food (F) and clothing (C) has a utility function given by U(F,C)= sqrt(F)C. The price of food is $3 and the price of clothing is $5 and Julio's weekly budget for food and clothing is $100.

a. What is Julio's MRSFe (marginal rate of substiution of food for clothing) when utility is maximized? Explain.

b. If Julio is at point where MRSFC= 1, where is that point relative to the utility maximzing bundle (show this in a diagram)?

c. Can Julio change his bundle so as to increase his satisfaction and if so in what way? Explain fully

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