Question
1.Jana consumes Food and other Stuff.She has a weekly budget of $500, and Food costs $5 while Stuff costs $10.She derives utility from both Food
1.Jana consumes Food and other Stuff.She has a weekly budget of $500, and Food costs $5 while Stuff costs $10.She derives utility from both Food and Stuff, and her utility function is . f^0.4+s^0.6
a.Graph Jana's budget constraint, with Stuff on the Y-axis.Be sure to label at least 3 possible consumption points
b.Solve for Jana's optimal consumption point, given her utility function and the relative prices of Food and Stuff.What quantity of Food and Stuff will Jana consume?Recall that MRS=MRT
c.Graph Jana's optimal consumption bundle "e" and Indifference curve.
d.If the price of Stuff decreases to $5, what happens to her budget constraint?What happens to her Utility?Graph the new budget constraint and speak *generally* (you don't need to solve for the new optimal consumption bundle) about the effect on Jana's Utility.
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