Sue’s monthly budget for bottled water and soft drinks is $23. The price of bottled water is $1 per bottle, and the price of soft drinks is $2 per bottle. Calculate the slope of Sue’s budget constraint. Given this information and the information provided in problem F-3, find the combination of goods that satisfies Sue’s utility-maximization problem in light of her budget constraint. F-3 The table below represent Sue’s preferences for bottled water and soft drinks, the combination of which yields the same level of utility. Combination of Bottled Water and Soft Drinks Bottled Water per Month Soft Drinks per Month A 5 11 B 10 7 C 15 4 D 20 2 E 25 1 Calculate Sue’s marginal rate of substitution of soft drinks for bottled water at each rate of consumption of water (or soft drinks). Relate the marginal rate of substitution to marginal utility .

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Chapter 20.F, Problem 5P

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Sue’s monthly budget for bottled water and soft drinks is $23. The price of bottled water is $1 per bottle, and the price of soft drinks is $2 per bottle. Calculate the slope of Sue’s budget constraint. Given this information and the information provided in problem F-3, find the combination of goods that satisfies Sue’s utility-maximization problem in light of her budget constraint.

F-3 The table below represent Sue’s preferences for bottled water and soft drinks, the combination of which yields the same level of utility.

Combination of Bottled Water and Soft Drinks Bottled Water per Month Soft Drinks per Month

A 5 11

B 10 7

C 15 4

D 20 2

E 25 1

Calculate Sue’s marginal rate of substitution of soft drinks for bottled water at each rate of consumption of water (or soft drinks). Relate the marginal rate of substitution to marginal utility.

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