Joe has preferences over pizza p and beer b given by u pb, Ask an Expert

Economics

Joe has preferences over pizza (p) and beer (b) given by U = pb. The marginal utilities are MU_p = b and MU_b= p, and Joe's income is I = 60.

1. Find Joe's optimal consumption bundle when p_p = 3 and p_b = 3.

2. Find the income and substitution effects (on both goods) of an increase in the price of pizza to p_p = 6.

3. Find the compensating variation of the price increase.

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Macroeconomics, Economics

Category:- Macroeconomics
Reference No.:- M9525478

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