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2. Yoda is choosing between combinations of apples and carrots. Yoda's preferences are shown on this table: apples utils carrots utils O O 0 O
2. Yoda is choosing between combinations of apples and carrots. Yoda's preferences are shown on this table: apples utils carrots utils O O 0 O 1 60 1 40 2 105 2 75 3 145 3 105 4 160 4 130 5 165 5 150 a. Find 3 different consumption bundles which would give different levels of utility b. Create a graph with indifference curves which include the bundles you described in part a. c. If Yoda has a budget of $12, and the price of apples are $2 and the price of carrots are $3, what will Yoda's optimal bundle be? Explain, using the concept of marginal rate of substitution. d. If the price of carrots drops to $2, what will be the impact on Yoda's optimal bundle? Explain. e. Explain in general terms what the income effect and substitution effect would be for Yoda when the price of apples drops. You should draw a graph to illustrate this effect; this graph should not be the graph you used for part b, and does not need to use the same indifference curves you showed there (but you should use the prices and quanties from the problem)
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