Joel is considering buying bundle A, which is 3 movies and 5 pizzas. At that bundle, his marginal rate of substitution is 3 pizzas for 2 movies. Is the proposed bundle Joel's optimal consumption bundle? If not, explain whether and why Joel buy more or fewer of each good to increase his utility. Illustrate consumption bundle A on a graph. If A is not the optimal bundle, also illustrate the optimal bundle (labeled B) on the same graph. Be sure to include and label all relevant lines, curves, and points.
Joel is considering buying bundle A, which is 3 movies and 5 pizzas. At that bundle, his marginal rate of substitution is 3 pizzas for 2 movies. Is the proposed bundle Joel's optimal consumption bundle? If not, explain whether and why Joel buy more or fewer of each good to increase his utility. Illustrate consumption bundle A on a graph. If A is not the optimal bundle, also illustrate the optimal bundle (labeled B) on the same graph. Be sure to include and label all relevant lines, curves, and points.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:3. Joel has an income of $96, which he can spend on two (normal) goods: movies and pizzas. Each movie
costs $12 and each pizza costs $8.
(a) Joel is considering buying bundle A, which is 3 movies and 5 pizzas. At that bundle, his marginal
rate of substitution is 3 pizzas for 2 movies. Is the proposed bundle Joel's optimal consumption
bundle? If not, explain whether and why Joel buy more or fewer of each good to increase his
utility.
(b) Illustrate consumption bundle A on a graph. If A is not the optimal bundle, also illustrate the
optimal bundle (labeled B) on the same graph. Be sure to include and label all relevant lines,
curves, and points.
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