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Jane, like Mary, grows silver bells and cockle shells in her garden, only she doesn’t have any space constraints. She does have a money constraint: she can only spend 500 pence (p) on flowers. Like Mary, Jane has a utility function for silver bells (b) and cockle shells (c) given by U(b,c)=(b+100c-c^2). Jane grows her flowers from seedlings that she buys in the local farmer’s market. The price of a silver bell seedling, Pb, is always 1p. Suppose the price of a cockle shell seedling is Pc=150p, how many cockle shells and silver bells would she buy? If instead, the price of cockle shells was Pc=2p, how many cockle shells and silver bells would she buy? What is the lowest price at which Jane would optimally buy zero cockle shells? Draw Jane’s demand curve for cockle shells.

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M91273687

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