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1. Jane has $500 a week to spend on clothing and food. The price of clothing is $25 and the price of food is $10.

a. Draw Jane's budget constraint for clothing and food.

b. For each of the following clothing/food bundles, indicate whether or not the bundle is attainable, and whether or not it COULD be a utility maximizing choice.

i. 10 units of clothing and 25 units of food.
ii. 20 units of clothing and 50 units of food.
iii. 10 units of clothing and 20 units of food.
iv. 20 units of clothing and 0 units of food.

2. Selma consumes 2 sandwiches and 3 Coca-colas. The last sandwich gives Selma 25 units of utility and the last Coca-cola gives her 5 units of utility. Sandwiches cost $3 apiece and Coca-colas cost $1 apiece. Is Selma maximizing her utility? If not, how could she increase her utility without spending more money?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M92011029
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