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5. Chimwemwe has to buy Chocolate and fruit juice and her marginal utility from each is as shown in the table below. If her
5. Chimwemwe has to buy Chocolate and fruit juice and her marginal utility from each is as shown in the table below. If her income is K9 and the prices of chocolate and fruit juice are K2 and K1, respectively. UNITS 1 2 4 5 6 MU of Chocolate 10 4 2 MU of Fruit Juice 8 7 6 5 4 (a) Draw a diagram to illustrate the budget line for Chimwemwe. Put chocolate on the horizontal axis and Fruit juice on the vertical axis. (b) What quantities of each will she purchase in maximizing utility? What is the Total Utility she realises? (c) The price of chocolate falls to K1. Ceteris Paribus, what quantities of chocolate and fruit juice does she purchase now? (d) Using the b and c, sketch the demand curve for chocolate. 6. Given utility U(x, y) = x!/3y2/3, Px = 2, Py = 5 and M= 400, find: a) The demand equation for X and Y. b) The utility maximizing levels of X and Y. c) The maximum utility d) The MRS at the optimum level 3.
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