Unformatted text preview: of good A and less of good B, or vice versa? Why? Problem 3. Budget Constraints Conny Mist's indifference map for food and booze, and her initial budget line, are shown at right. A. Find the utility-maximizing bundle Z*. B. Suppose Conny gets food stamps that entitle her to 10 units of free food, but which cannot be used for booze. Draw the new budget line and show that her utility rises compared to part A. 1 Some answers provided in boldface . 10 20 30 Q food Q booze...
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- Spring '08
- indifference maps, Rodney Random, Thinking Suppose Rodney