Question 2Horatio consumes 20 fries and 12 shakes per week. The price of fries is $3each and shakes are $5 each.2.1 What is the amount of income allocated to shakes and fries consumption?2.2 What is the price ratio (the price of shakes relative to the price of fries)?2.3 If Horatio maximizes utility, what is the ratio of the marginal utility ofshakes to the marginal utility of fries? (Hint: Start with the rule that you knowand then use a bit of algebra.)2.4 If the price of fries falls, will Horatio consume more fries, fewer fries, or thesame amount of fries? Explain your answer using the rule of equal marginalutility per dollar, and include a rationale.

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Answered: Question 2 Horatio consumes 20 fries…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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