(Answered) Sarah has a monthly income of 200 dollars that she spends

Management Studies

Sarah has a monthly income of 200 dollars that she spends buying food that costs 5 dollars, and clothes that cost 60 dollars. Sarah's utility function is given by: U(F,C)=2In(F)+4In(C)

a) Write down Sarah's budget constraint.

b) Suppose that Sarah want to consume F = 20, and C = 1. Is this a feasible allocation?

c) Compute the marginal rate of substitution (MRS) of food for clothing. Explain the implied trade-off at F = 20 and C =1.

d) Find the demand functions for food and for clothing (where PF represents the price of food and PC represents the price of clothing).

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