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Unformatted text preview: economics (1000) is more than the marginal utility per hour of reading romance novels (800). She should read more economics and less romance. 3. a. 0.25Qs+0.5Qc=5 b. Budget constraint becomes 0.5Qs+0.5Qc=5. Budget in part a is the flatter one and in part b is the steeper one. c. MUs/MUc=Ps/Pc=0.5/0.5=1 4. Price of good Y is $3 and at the point on the vertical axis, you can buy 0 X and 20 Y. 0*Px+20*Py=I, I=20*3=60 At point A, 12Py+4Px=I, 12*3+4Px=60, Px=6 At point B, 12Py+8Px=I, 12*3+8Px=60, Px=3 At point C, it is very hard to see how many Y are consumed, so I use the point on the horizontal axis. 0Py+30Px=60, Px=2...
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- Fall '08
- Economics, Euclidean geometry