Question

In: Economics

Derek spends all his income on Coke and chips. Derek's utility function is U(x, y) =...

Derek spends all his income on Coke and chips.

Derek's utility function is U(x, y) = min(4x, 2x + y), where x is his consumption of Coke

(in cans) and y is his consumption of chips (in packets). Derek is consuming 15 cans

Of Coke and 10 packets of chips. The price of Coke is $10 per can.

a. Graph the indifference curve for Derek that passes through the point (15,10). What is

the marginal rate of substitution at (15,10)?

b. What is the price of chips?

c. How much is Derek’’s income?

d. Suppose Derek can now afford 10 cans of Coke and 30 packets of chips, would he

choose to do that instead?

Solutions

Expert Solution

Rahul Sunny answered 1 year ago
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