Alia only likes tacos, which she buys from two local restaurants - Alberto's and Roberto's – so let's definegood x=Alberto's tacos and good y=Roberto's tacos. But let's face it, Roberto's is the best, and we wouldhave to offer Alia 3 Alberto's tacos in order to convince her to give up 2 Roberto's tacos, regardless ofhow much she is currently consuming.a) Write Alia's utility function and draw some of her indifference curves.b) If Px=$2, Py=$4, and I=$24, how much of each type of taco will Aila purchase?c) What if Roberto's tacos go on sale for $2 each?

Answered: Write Alia's utility function and draw…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Alia only likes tacos, which she buys from two local restaurants - Alberto's and Roberto's – so let's define
good x=Alberto's tacos and good y=Roberto's tacos. But let's face it, Roberto's is the best, and we would
have to offer Alia 3 Alberto's tacos in order to convince her to give up 2 Roberto's tacos, regardless of
how much she is currently consuming.
a) Write Alia's utility function and draw some of her indifference curves.
b) If Px=$2, Py=$4, and I=$24, how much of each type of taco will Aila purchase?
c) What if Roberto's tacos go on sale for $2 each?

Expert Solution

Step 1

Utility Function: Ultility function measures the satisfaction level of a consumer while he/she consumes a normal good to satisfy his /her utility level.

Indiffrence Curve: It is measured as bundle of goods (generally taken as two goods) where combination of two goods gives the consumer same utility or satisfaction level.

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