Exercise 1 Marie’s utility function is u x 1 , x 2 =...

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Intermediate Microeconomics Homework Set 4: Solution sheet Exercise 1 Marie’s utility function is u ( x 1 , x 2 ) = min { 3 x 1 +2 x 2 , 2 x 1 +5 x 2 } , where x 1 is the number of units of sugar she consumes and x 2 is the number of units of spice she consumes. She is currently consuming 12 units of sugar and 40 units of spice and she is spending all of her income. (1) Draw a graph showing her indifference curve through this point. (2) The price of spice is $1. In order for this to be her consumption bundle, what must the price of sugar be and what must be her income? Answer

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