Please find the attachment. Nick's utility over hummus (h) and books (b) is described by U(Qh, Qb) = Q.7 Q0.³.h(a) Nick has $60 to spend. The price of hummus is $6 per unit, and the price of books is $18 perunit. Write the equation for Nick's budget constraint and graph it.(b) How much hummus and books will Nick buy? How much utility does he derive from the optimalbundle?(c) Show Nick's optimal consumption on a graph.

Nick's utility function: Nick's income =$60. Price of hummus =$6 per unit.The price of books is $18…

Answered: Nick's utility over hummus (h) and…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Question

Please find the attachment.

Nick's utility over hummus (h) and books (b) is described by U(Qh, Qb) = Q.7 Q0.³.
h
(a) Nick has $60 to spend. The price of hummus is $6 per unit, and the price of books is $18 per
unit. Write the equation for Nick's budget constraint and graph it.
(b) How much hummus and books will Nick buy? How much utility does he derive from the optimal
bundle?
(c) Show Nick's optimal consumption on a graph.

Expert Solution

Step 1: Determine the given information:

Nick's utility function: $U open parentheses Q subscript h comma Q subscript b close parentheses equals Q subscript h to the power of 0.7 end exponent Q subscript b to the power of 0.3 end exponent$

Nick's income =$60.

Price of hummus =$6 per unit.

The price of books is $18 per unit.

If the price of hummus is denoted by P_h and the price of books is denoted by P_b, then the equation of budget constant will be given as

$P subscript h Q subscript h plus P subscript b Q subscript b equals I n c o m e$

Nick's optimal bundle is the utility-maximizing bundle, and the utility-maximizing condition is $fraction numerator M U subscript h over denominator M U subscript b end fraction equals P subscript h over P subscript b$

Step by step

Solved in 5 steps with 15 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions