Ms Smith likes to drink wine; in particular, a french bordeaux (ƒ) at $40 per bottle and a California varietal wine (c) priced at $8. She allocates $600 to these two each month; and her utility is: U(ƒ, c) = ƒ²/³c¹/³ (a) Write out her (constrained) utility maximization problem. Solve for the optimal consumption of wine f and c. (b) Suppose the price of f falls to $20, but c continues to be priced at $8. How much
Ms Smith likes to drink wine; in particular, a french bordeaux (ƒ) at $40 per bottle and a California varietal wine (c) priced at $8. She allocates $600 to these two each month; and her utility is: U(ƒ, c) = ƒ²/³c¹/³ (a) Write out her (constrained) utility maximization problem. Solve for the optimal consumption of wine f and c. (b) Suppose the price of f falls to $20, but c continues to be priced at $8. How much
Microeconomics: Principles & Policy
14th Edition
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:William J. Baumol, Alan S. Blinder, John L. Solow
Chapter5: Consumer Choice: Individual And Market Demand
Section: Chapter Questions
Problem 3DQ
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Only part C. Thank you!
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