PROBLEM (3) Violet buys pies (x) and champagne (y) with her income of $400 and her utility function over pies (x) and champagne (y) (assumed to be divisible goods, where any real number unit pie or champagne is feasible) is Cobb-Douglas and given by u(x, y) = xy. The price of champagne is py = $10 per bottle. (a) Pies cost px = $10 per pie if she buys between zero and 20 pies; if she buys more than 20 pies, each additional pie is half-price, i.e., px = $5. Draw her budget set, carefully labelling all relevant points. calculate the quantities of pies and champagne she will consume when she maximizes her preferences. (b) (HARDER! We haven't covered this scenario in class) Pies cost px = $10 per pie if she buys between zero and 20 pies; if she buys more than 20 pies, each pie purchased is half-price, i.e., px = purchased, not the additional ones! Draw her budget set, carefully labelling all relevant points. Calculate the quantities of pies and champagne she will consume when she maximizes her preferences. $5. The discount applies to all units

PROBLEM (3) Violet buys pies (x) and champagne (y) with her income of $400 and her utility function over pies (x) and champagne (y) (assumed to be divisible goods, where any real number unit pie or champagne is feasible) is Cobb-Douglas and given by u(x, y) = xy. The price of champagne is py = $10 per bottle. (a) Pies cost px = $10 per pie if she buys between zero and 20 pies; if she buys more than 20 pies, each additional pie is half-price, i.e., px = $5. Draw her budget set, carefully labelling all relevant points. calculate the quantities of pies and champagne she will consume when she maximizes her preferences. (b) (HARDER! We haven't covered this scenario in class) Pies cost px = $10 per pie if she buys between zero and 20 pies; if she buys more than 20 pies, each pie purchased is half-price, i.e., px = purchased, not the additional ones! Draw her budget set, carefully labelling all relevant points. Calculate the quantities of pies and champagne she will consume when she maximizes her preferences. $5. The discount applies to all units

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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PROBLEM (3) Violet buys pies (x) and champagne (y) with her income of $400 and her utility function over pies
(x) and champagne (y) (assumed to be divisible goods, where any real number unit pie or champagne is feasible) is
Cobb-Douglas and given by u(x, y) = xy. The price of champagne is py = $10 per bottle.
(a) Pies cost px = $10 per pie if she buys between zero and 20 pies; if she buys more than 20 pies, each additional pie
is half-price, i.e., px = $5. Draw her budget set, carefully labelling all relevant points. calculate the quantities of pies
and champagne she will consume when she maximizes her preferences.
(b) (HARDER! We haven't covered this scenario in class) Pies cost px = $10 per pie if she buys between zero and 20
pies; if she buys more than 20 pies, each pie purchased is half-price, i.e., px = $5. The discount applies to all units
purchased, not the additional ones! Draw her budget set, carefully labelling all relevant points. Calculate the
quantities of pies and champagne she will consume when she maximizes her preferences.

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