Pele enjoys coffee (C) and tea (T) according to the function U(C,T) = 6C +8T (a) What does her utility function say about her MRS of coffee and tea? (b) Suppose the price of coffee (PC) and the price of tea (PT) are both $3. If Alana has $12 to spend on these products, i. How much coffee and tea should she buy to maximize her utility? ii. Draw a carefully labeled graph of her indifference curve map and her budget constraint. Put the quantities of coffee on the horizontal axis. Be sure to identify the utility maximizing point.
Pele enjoys coffee (C) and tea (T) according to the function U(C,T) = 6C +8T (a) What does her utility function say about her MRS of coffee and tea? (b) Suppose the price of coffee (PC) and the price of tea (PT) are both $3. If Alana has $12 to spend on these products, i. How much coffee and tea should she buy to maximize her utility? ii. Draw a carefully labeled graph of her indifference curve map and her budget constraint. Put the quantities of coffee on the horizontal axis. Be sure to identify the utility maximizing point.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Please answer sub-part d) of the question.
Transcribed Image Text:Pele enjoys coffee (C) and tea (T) according to the function
U(C, T) = 6C + 8T
(a) What does her utility function say about her MRS of coffee and tea?
(b) Suppose the price of coffee (PC) and the price of tea (PT) are both $3. If Alana has $12 to spend
on these products,
i. How much coffee and tea should she buy to maximize her utility?
ii. Draw a carefully labeled graph of her indifference curve map and her budget constraint. Put the
quantities of coffee on the horizontal axis. Be sure to identify the utility maximizing point.
(c) Would Alana buy more coffee if she had more income? Explain.
(d) Suppose the price of coffee fell to $2. How would her consumption change?
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