Ursula views one cup of frozen yogurt to be a perfect substitute for three pieces of chocolate chip brownies. A cup of frozen yogurt sells for $6, and a piece of chocolate chip brownies is $3, and Ursula has a monthly budget of $180 to buy frozen yogurt and brownies. a) What bundle should Ursula buy to maximize her utility? Show how to determine this bundle on a diagram using indifference curves and a budget line ((with frozen yogurt –Y– on the vertical axis).
Ursula views one cup of frozen yogurt to be a perfect substitute for three
pieces of chocolate chip brownies. A cup of frozen yogurt sells for $6, and a piece of chocolate chip brownies is $3, and Ursula has a monthly budget of $180 to buy frozen yogurt and
brownies.
a) What bundle should Ursula buy to maximize her utility? Show how to determine this bundle on a diagram using indifference
b) If the price of a cup of frozen yogurt increases to $9, how would Ursula’s behavior change? Show the utility-maximizing bundles on diagrams with budget line and indifference curves (with frozen yogurt –Y– on the vertical axis).
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