5. Wanda Littlemore's utility function is U(x, y) =x + 46y 23:2. Her income is $135. If the price of x is $1 and the price of y is $18, how many units of goodx will Wanda demand? a. 9 b. 12 c. 16 d. O Part 2: Short Answer Questions Problem 1 ( 40pts) ( Well-behaved preferences) Freddie Frolic consumes only two types of commodities: cheese curds, 3:1, and diet coke, $2. a) The price of one portion of cheese curds is pl: 5 and one diet coke is 132: 2. Freddie' 5 income spent entirely on the two commodities is m : 60. Show geometrically Freddie's budget set. Find relative price of cheese curds in terms of coke (number). Give economic interpretation of the relative price (one sentence). Where can the relative price be seen in the graph of a budget set? (one sentence) b) Suppose that due to shortages in cheese supply, cheese curds are rationed, i.e., each consumer can buy at most ve portions. Show the new budget set on the graph. c) Freddie's utility is U(:cl,a:2) = aln$1+blncc2. -Find Marginal Rate of Substitution (MRS) as a function of parameters a, b and $1, 1'2 (derive formula). For parameters a = 4, b = 2 and bundle (7, 7) nd value of MRS (one number). Give economic interpretation of MRS (one sentence). Which of the goods is more valuable at the bundle (7, 7)? What is the geometric interpretation of MRS? (one sentence) d) Write down two secrets of happiness that eetermine optimal choice. Explain economic intuition behind the two conditions ( one sentence for each). 6) Derive optimal choice oer'l and 1:2. Assume a = 4 , b = 2 andpl=5. p 2: 2, m: 60