Quiz-3-2010-1 - (c Use a graph to show the effect of the...

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ARE 100A Quiz on Problem Set III January 29 2010 Name…………………………….. Section…………………………….. 1. A consumer spends his income only on bread. He consumes two brands of bread, Safeway (S) and Nugget (N). Units consumed are measured by N and S. The consumer’s utility function is given by: U(N,S)= 5 ln N + 2.5 ln S. N P is given as $4 and is given as $2. The income of the consumer is given as $48. S P (a) Find the equilibrium that maximizes the consumer’s utility in the problem above. Obtain the quantities and utility level. (b) If the price of N decreases from $4 to $3, what will the new equilibrium quantities be ?
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