Suppose you have preferences for pizza (z) and soda (d). The price of pizza, pz = 5.00 and the price of soda, pd = 2.00. You have an income of I = 20 that you can spend on pizza and soda every week. Suppose you like to always consume 3 pieces of pizzas with 2 cups of soda. •(i) What type of preference do you have for pizzas and sodas? •(ii) Derive the utility function for pizza and sodas •(iii) Solve for your optimal consumption of pizza and sodas •(iv) Illustrate your answer to (iii) on a graph, include your indifference curve, the budget constraint, the slope of the budget constraint, and all labels.
Suppose you have preferences for pizza (z) and soda (d). The
pd = 2.00. You have an income of I = 20 that you can spend on pizza and soda every week.
Suppose you like to always consume 3 pieces of pizzas with 2 cups of soda.
•(i) What type of preference do you have for pizzas and sodas?
•(ii) Derive the utility function for pizza and sodas
•(iii) Solve for your optimal consumption of pizza and sodas
•(iv) Illustrate your answer to (iii) on a graph, include your indifference curve, the budget constraint,
the slope of the budget constraint, and all labels.
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The choice of a customer towards particular goods and services to get the maximum satisfaction amongst the available options is known as consumer preference. There are various types of consumer preferences like revealed preferences, convenience, repeat purchase preferences, time preferences, etc.
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