PROBLEM (4) Zoey has $3 budget in total and can spend her money on cookies (x) and bananas (y).She has preferences over cookies and bananas represented by u(x,y) = x²y. The first 5 cookies are free for Zoey, but each additional cookie costs $1. Bananas are always $1 each. (a) Draw her feasible budget set, identifying all the intercepts, kinks, etc... (b) What is her optimal bundle? (c) What is her optimal bundle if she only had a $2 budget? (d) Suppose she has $2 budget, but now not only the first 5 cookies are free, but also the first 3 bananas (additional cookies or bananas are $1 each as before). Draw her budget set and calculate her optimal bundle.
PROBLEM (4) Zoey has $3 budget in total and can spend her money on cookies (x) and bananas (y).She has preferences over cookies and bananas represented by u(x,y) = x²y. The first 5 cookies are free for Zoey, but each additional cookie costs $1. Bananas are always $1 each. (a) Draw her feasible budget set, identifying all the intercepts, kinks, etc... (b) What is her optimal bundle? (c) What is her optimal bundle if she only had a $2 budget? (d) Suppose she has $2 budget, but now not only the first 5 cookies are free, but also the first 3 bananas (additional cookies or bananas are $1 each as before). Draw her budget set and calculate her optimal bundle.
Microeconomics A Contemporary Intro
10th Edition
ISBN:9781285635101
Author:MCEACHERN
Publisher:MCEACHERN
Chapter12: Labor Markets And Labor Unions
Section: Chapter Questions
Problem 3QFR
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Transcribed Image Text:PROBLEM (4) Zoey has $3 budget in total and can spend her money on cookies (x) and bananas (y).She has
preferences over cookies and bananas represented by u(x,y) = x?y. The first 5 cookies are free for Zoey, but each
additional cookie costs $1. Bananas are always $1 each.
(a) Draw her feasible budget set, identifying all the intercepts, kinks, etc...
(b) What is her optimal bundle?
(c) What is her optimal bundle if she only had a $2 budget?
(d) Suppose she has $2 budget, but now not only the first 5 cookies are free, but also the first 3 bananas
(additional cookies or bananas are $1 each as before). Draw her budget set and calculate her optimal bundle.
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