Sofia only drinks a cup of coffee (C) with 2 teaspoons of sugar (S). She spends...

Sofia only drinks a cup of coffee (C) with 2 teaspoons of sugar (S). She spends 15 dollars per week on both goods. Suppose the price of a cup of coffee is $ 1 and the price of one spoon of sugar is 25 cents.

a) Write down Sofia’s utility function and draw her indifference map. What is the marginal rate of substitution between coffee and sugar?

b) Write down her budget constraint. What is the slope of the budget line?

c) Find the utility maximizing bundle for Sofia. Show her equilibrium on the graph.

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Expert Solution

Rahul Sunny answered 1 year ago

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