Question
In: Economics
Horatio consumes 20 fries and 12 shakes per week. The price of fries is $3 each...
Horatio consumes 20 fries and 12 shakes per week. The price of
fries is $3 each and shakes are $5 each.
2.1 What is the amount of income allocated to shakes and fries
consumption?
2.2 What is the price ratio (the price of shakes relative to the
price of fries)?
2.3 If Horatio maximizes utility, what is the ratio of the marginal
utility of shakes to the marginal utility of fries? (Hint: Start
with the rule that you know and then use a bit of algebra.)
2.4 If the price of fries falls, will Horatio consume more fries,
fewer fries, or the same amount of fries? Explain your answer using
the rule of equal marginal utility per dollar, and include a
rationale.
Solutions
Rahul Sunny answered 1 year agoRelated Solutions
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