Extra Problem: Utility Function: U(t, s) = 4ts Price of t: Pt = $5 Price of s: Ps = $10 Income: M = $100 (Assume that t is measured on the horizontal axis and s is measured on the vertical axis.) a. Write the equation of the Budget Line in the form of total spending = income. Plug in specific numerical values. b. Solve for the values of t and s that maximize the Utility Function subject to the Budget Line to identify the Consumer Equilibrium. c. Calculate the Utility using the Consumer Equilibrium values of t and s obtained in part b (i.e., U(t*, s*)). d. Draw a graph labeling the horizontal and vertical intercepts of the Budget Line and including an indifference curve that identifies the Consumer Equilibrium.
Extra Problem:
Utility Function: U(t, s) = 4ts
Price of t: Pt = $5
Price of s: Ps = $10
Income: M = $100
(Assume that t is measured on the horizontal axis and s is measured on the vertical axis.)
a. Write the equation of the Budget Line in the form of total spending = income. Plug in specific numerical values.
b. Solve for the values of t and s that maximize the Utility Function subject to the Budget Line to identify the Consumer Equilibrium.
c. Calculate the Utility using the Consumer Equilibrium values of t and s obtained in part b (i.e., U(t*, s*)).
d. Draw a graph labeling the horizontal and vertical intercepts of the Budget Line and including an indifference curve that identifies the Consumer Equilibrium.
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