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Maria consumes two goods, strawberries and other goods. Because of her exquisite taste, she buys her strawberries from a particular vendor. Her preferences over other goods y and strawberries x is characterized by a utility function U(x, y) = x + y, where y is measured in dollars and x is measured in pounds. Her income is $30/month. (a) In May strawberries cost $1.50/pound. What is her consumption choice? Justify either with math or a graph. (b) In July strawberries are $.50 (50 cents)/pound, what is her optimal consumption choice? Justify either with math or a graph. (c) In August her favorite vendor has a special: Strawberries are $2/pound, but a you get a $15 prepaid credit card with a purchase of 10 pounds of strawberries (think of this as getting cash back). What is her optimal consumption choice? Justify either with math or a graph.

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91722277

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