Q1) Vera is the impoverished graduate student who as only $100 a month to spend on food. She has read in government publication that she can assure adequate diet by eating only peanut butter and carrots in fixed ratio of 2 pounds of peanut butter to 1 pound of carrots, so she decides to limit her diet to that regime.
1. If peanut butter costs $4 per pound and carrots cost $2 per pound, how much can she eat in the month?
2. Assume peanut butter costs rise to $5 because of peanut subsidies introduced by politically sensitive government. By how much will Vera have to decrease her food purchases?
3. How much in food stamp aid would government have to give Vera to compensate for effects of peanut subsidy?
4. Describe why Vera's preferences are of very special type here. How would you graph them?