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Unformatted text preview: u XY = . Solve the UMP again. c. Are the results for (a) and (b) different? Why? 3. Suppose Joseph’s income is 120 dollars per day. For simplification, assume he only consumes bread and milk. The price of bread is 2 dollars per pack and the price of milk is 4 dollars per gallon. Further, suppose Joseph cannot eat bread without milk. That is, for him to finish 1 pack of bread, he also needs 2 gallons of milk. a. Draw Joseph’s budget line and a system of at least three indifference curves. b. Find Joseph’s optimal daily consumption of bread and milk. c. Suppose now Joseph’s income is 200 dollars per day, while the price of both bread and milk are 5 dollars per unit. Use another color of pen to draw the new budget line for Joseph on the graph you created for (a). d. Find Joseph’s new optimal daily consumption of bread and milk....
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This note was uploaded on 03/29/2012 for the course ECON 101 taught by Professor Schneider during the Spring '11 term at Kansas State University.
- Spring '11