Octopus has 5RL (Right Legs) and 3LL (Left legs) Will only wear matching shoes on all 8 legs Utility Function U(q1,q2) = min[3q1,5q2] where: q1 = number of right shoes q2 = number of left shoes Octopus income is = $70 p1 = Price of right shoes = $4 p2 = Price of left shoes = $5 Find and graph budget line for the Octopus, and a few indifference curves. Display the optimal Bundle on the graph. Right shoes on X axis. Then Find the Optimal Bundle (How many of left/right shoes she will buy) 2. Octopus income decreases to $35. Calculate new optimal bundle and graph it 3. Repeat g) for income = 105. 4. Given answers to 1,2,3 Draw income consumption curve and engel curve for right shoes Are Right shoes normal or inferior good for Margot? What way is the engel curve sloping?
Octopus has 5RL (Right Legs) and 3LL (Left legs) Will only wear matching shoes on all 8 legs Utility Function U(q1,q2) = min[3q1,5q2] where: q1 = number of right shoes q2 = number of left shoes Octopus income is = $70 p1 = Price of right shoes = $4 p2 = Price of left shoes = $5 Find and graph budget line for the Octopus, and a few indifference curves. Display the optimal Bundle on the graph. Right shoes on X axis. Then Find the Optimal Bundle (How many of left/right shoes she will buy) 2. Octopus income decreases to $35. Calculate new optimal bundle and graph it 3. Repeat g) for income = 105. 4. Given answers to 1,2,3 Draw income consumption curve and engel curve for right shoes Are Right shoes normal or inferior good for Margot? What way is the engel curve sloping?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Octopus has 5RL (Right Legs) and 3LL (Left legs)
Will only wear matching shoes on all 8 legs
Utility Function U(q1,q2) = min[3q1,5q2] where:
q1 = number of right shoes
q2 = number of left shoes
Octopus income is = $70
p1 = Price of right shoes = $4
p2 = Price of left shoes = $5
- Find and graph budget line for the Octopus, and a few indifference curves. Display the optimal Bundle on the graph. Right shoes on X axis.
Then Find the Optimal Bundle (How many of left/right shoes she will buy)
2. Octopus income decreases to $35. Calculate new optimal bundle and graph it
3. Repeat g) for income = 105.
4. Given answers to 1,2,3 Draw income consumption curve and engel curve for right shoes
Are Right shoes normal or inferior good for Margot?
What way is the engel curve sloping?
ANSWER 4.
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