Lilly Davis has $5 per week to spend on any combination of ice cream and candy. The
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Question:
Lilly Davis has $5 per week to spend on any combination of ice cream and candy. The price of an ice cream cone is $2 and the price of a candy bar is $1. The table below shows Lilly?s utility values. Use the table to answer the questions that follow the table.
a) Complete the table by filling in the blank spaces.
b) Suppose Lilly purchases 2 ice cream cones and 1 candy bar. Is she consuming the optimal consumption bundle? If so, explain why. If not, what combination should she buy and why?
c) Suppose the price of an ice cream cone drops to $1, do you expect Lilly to buy more or fewer candy bars than before? Why?
Related Book For
Operations Management Managing Global Supply Chains
ISBN: 978-1506302935
1st edition
Authors: Ray R. Venkataraman, Jeffrey K. Pinto
Posted Date: