Carol needs to decide how to spend her wealth on fish and chicken. For Carol, 1 lb of fish is equivalent to 2 lb of chicken. Her preferences can be represented by the utility function u(x; y) = 2x + y where x is the quantity of fish (in lbs) and y is the quantity of chicken (in lbs). The consumption set is R2+. a) Draw two typical indifference curves for Carol, one corresponding to a utility level of U1 and one corresponding to a utility level U2, where 0 < U1 < U2. Make sure you label the slope of the indifference curves and the intercepts with the horizontal and vertical axes. b) Suppose the price of fish is $1.5 per lb and and the price of chicken is $1 per lb. Carol has $20 to spend on fish and chicken. Draw Carol's budget set, labeling the slope and the intercept points clearly. How much fish and chicken will Carol choose to purchase?
Carol needs to decide how to spend her wealth on fish and chicken. For Carol, 1 lb of fish is equivalent to 2 lb of chicken. Her preferences can be represented by the utility function
u(x; y) = 2x + y
where x is the quantity of fish (in lbs) and y is the quantity of chicken (in lbs). The consumption set is R2+.
a) Draw two typical indifference
b) Suppose the price of fish is $1.5 per lb and and the price of chicken is $1 per lb. Carol has $20 to spend on fish and chicken.
Draw Carol's budget set, labeling the slope and the intercept points clearly. How much fish and chicken will Carol choose to purchase?
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