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Freshman Jim Student only consumes two goods: paper (P) and cups of coffee (C). Suppose that currently Jim has $300 of spending money for the semester. The price of coffee is $3.00 per cup and the price of paper is $5 per 100 sheets. Jim's preferences are very nicely behaved (indifference curves that are bowed-in towards the origin). Assume that both coffee and paper are normal goods for Jim and that both coffee and paper can be purchased and consumed in fractional units.

Question: On your budget line graph, properly illustrate Jim's optimal bundle on his utility maximizing indifference curve.

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M91704064

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