Gabriel, a student, has a budget of £60 to spend on cappuccinos (good X) and on cups of tea (good Y) during breaks while revising for his economics examination. The prices of the two goods are Px = 3 and Py = 2, respectively. Gabriel's preferences over the two goods are described by the utility function U (X,Y)= XY, for which MUX = Y and MUy = X. (a) Explain how Gabriel's tastes over cappuccinos and cups of tea can be translated into indifference curves. Sketch some of these in a diagram. What determines their slope?

Gabriel, a student, has a budget of £60 to spend on cappuccinos (good X) and on cups of tea (good Y) during breaks while revising for his economics examination. The prices of the two goods are Px = 3 and Py = 2, respectively. Gabriel's preferences over the two goods are described by the utility function U (X,Y)= XY, for which MUX = Y and MUy = X. (a) Explain how Gabriel's tastes over cappuccinos and cups of tea can be translated into indifference curves. Sketch some of these in a diagram. What determines their slope?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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