The figure below shows one of Josie's indifference curves between peaches and cream-the indifference curve that gives Josie 100 utils of happiness.Josie's income is $32, and peaches and cream each sell for $4. Add Josie's budget line to the graph, and then add a point at her utility-maximizing bundle of peaches andcream.Segment• Point* UndoA Redox Reset10863212356810Cream

Answered: The figure below shows one of Josie's…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The figure below shows one of Josie's indifference curves between peaches and cream-the indifference curve that gives Josie 100 utils of happiness.
Josie's income is $32, and peaches and cream each sell for $4. Add Josie's budget line to the graph, and then add a point at her utility-maximizing bundle of peaches and
cream.
Segment
• Point
* Undo
A Redo
x Reset
10
8
6
3
2
1
2
3
5
6
8
10
Cream

Expert Solution

Step 1

$J o s i e' s i n c o m e = $ 32 P r i c e o f p e a c h e s = $ 4 P r i c e o f c r e a m = $ 4 N o w, M a x i m u m p e a c h e s J o s i e c a n p u r c h a s e = \frac{32}{4} = 8 I n c o m e l e f t f o r c r e a m = 32 - 32 = $ 0 I f J o s i e p u r c h a s e 7 u n i t s o f p e a c h e s : I n c o m e s p e n t o n 7 p e a c h e s = 7 \times 4 = $ 28 I n c o m e l e f t f o r c r e a m = $ 4 . T h u s, h e c a n b u y 1 u n i t o f c r e a m A l l p o s s i b l e c o m b i n a t i o n s a r e g i v e n i n t h e b e l o w t a b l e$

Peaches	Creams
8	0
7	1
6	2
5	3
4	4
3	5
2	6
1	7
0	8

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