Emily goes camping on the weekend and eats marshmallows (M) and crackers (C) there. She wants to match 1 marshmallow with 2 crackers, but does not eat in different proportion (i.e., perfect com- plement). The price of a marshmallow is 10 cents and the price of a cracker is 5 cents, and she spend up to $3 in total. a) Write down a utility function which represents Emily's preferences over marshmallows and crackers. b) How many marshmallows and crackers is she going to consume? (Hint: the first-order conditions will not help; draw the budget constraint and the indifference curves and look at the highest one that intersect the budget constraint). c) What is the exact value of Emily's indirect utility?

Emily goes camping on the weekend and eats marshmallows (M) and crackers (C) there. She wants to match 1 marshmallow with 2 crackers, but does not eat in different proportion (i.e., perfect com- plement). The price of a marshmallow is 10 cents and the price of a cracker is 5 cents, and she spend up to $3 in total. a) Write down a utility function which represents Emily's preferences over marshmallows and crackers. b) How many marshmallows and crackers is she going to consume? (Hint: the first-order conditions will not help; draw the budget constraint and the indifference curves and look at the highest one that intersect the budget constraint). c) What is the exact value of Emily's indirect utility?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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