Dalal consumes only two goods for lunch and dinner: risotto (R) and lamb machboos (M). Dalal’s utility function is given by U(R,M) = R + 4M. Suppose that a risotto dish costs 3 KD and that a dish of lamb machboos costs 6 KD. Dalal has 300 KD a month to spend on her lunch and dinner meals. d. What would Dalal’s optimal basket be given that her utility will equal the level found in part (c)? e. How much would the basket found in part (d) cost? f. How much cash does Jassem need to offer to fulfill his promise? Although both of Jassem’s offers will make Dalal just as happy, their costs will not be the same.
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Dalal consumes only two goods for lunch and dinner: risotto (R) and lamb machboos (M). Dalal’s utility function is
given by U(R,M) = R + 4M. Suppose that a risotto dish costs 3 KD and that a dish of lamb machboos costs 6 KD.
Dalal has 300 KD a month to spend on her lunch and dinner meals.
d. What would Dalal’s optimal basket be given that her utility will equal the level found in part (c)?
e. How much would the basket found in part (d) cost?
f. How much cash does Jassem need to offer to fulfill his promise?
Although both of Jassem’s offers will make Dalal just as happy, their costs will not be the same.
g. What is the cheaper option for Jassem: offering a 60 KD risotto gift card or offering the amount of cash found
in part (f)
part c solution, available utility is R+4M = 20+200 = 220 utils.
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