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5. Consider a consumer, John, who allocates a certain fraction of his income towards going to sporting events. John spends all his money to sporting
5. Consider a consumer, John, who allocates a certain fraction of his income towards going to sporting events. John spends all his money to sporting event on either football games or baseball games. His budget constraint is therefore:
Y^s = pF F + pBB
Note here that s denotes sporting event in general, and F denotes football game, B denotes baseball games. In this example:
U(B, F) = 2(F B)^6
Y^t = 2000
pF = 80
pB = 20
(a) Calculate the MRS and interpret
(b) Calculate the demand function for B and F
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