Question 1 Jennifer is a single mom with a weekly budget of $100. She can spend her weekly income on food and diapers for her son. Price of food is $1 and price of a diaper is 50 cents. Her son needs at least 5 diapers a day, therefore she must purchase at least 35 diapers weekly. Jennifer's utility function is U(f,d) = fo.9 0.1 where f and d represent quantity of food and diapers, respectively.
Question 1 Jennifer is a single mom with a weekly budget of $100. She can spend her weekly income on food and diapers for her son. Price of food is $1 and price of a diaper is 50 cents. Her son needs at least 5 diapers a day, therefore she must purchase at least 35 diapers weekly. Jennifer's utility function is U(f,d) = fo.9 0.1 where f and d represent quantity of food and diapers, respectively.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Question 1
Jennifer is a single mom with a weekly budget of $100. She can spend her weekly
income on food and diapers for her son. Price of food is $1 and price of a diaper
is 50 cents. Her son needs at least 5 diapers a day, therefore she must purchase
at least 35 diapers weekly. Jennifer's utility function is U(f,d) = fo.⁹ 10.1,
where f and d represent quantity of food and diapers, respectively.
Question 1 Part a
Find Jennifer's optimal consumption bundle. Make sure to draw her budget
constraint and indifference curves and clearly demonstrate your solution.
Question 1 Part b
Jennifer's uncle Sam, who is aware of her financial troubles, offers to help her
out. Specifically, he offers to pay half of her weekly diaper expenses. How
many diapers Jennifer would buy now? Again, demonstrate your solution both
graphically and analytically.
Expert Solution
Step 1
Utility function : U(f , d ) = f0.9d0.1
Price of food = 1
Price of diaper = 0.5
Weekly Budget = 100
Optimal consumption bundle is achieved at the point where marginal rate of substitution is equal to the price ratio .
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