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2 Multiple Goods [12 pts] A buyer's preferences are represented by the following utility function and the corresponding marginal utility functions for each of the
2 Multiple Goods [12 pts] A buyer's preferences are represented by the following utility function and the corresponding marginal utility functions for each of the two goods in the economy; iTune songs and beer U = 50VSVb MUs = 251 0 1 60 / 60 1 0 MUb = 25 Vi Where MUs is the marginal utility of songs and MU is the marginal utility of beer. We also know that the market price of an iTunes song is $1, the price of a beer is $4, and the consumer's budget is $100. a. [4 pts] If the consumer is purchasing 15 beers and 40 songs is the consumer optimizing? If not, how can they be made better off? Show the consumer's current consumption bundle graphically using indifference curves and a budget constraint. b. [3 pts] How many iTunes songs and beers will the consumer optimally purchase? Show graphically. 3
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