A. Perdue Farms is the parent company of Perdue Foods and Perdue AgriBusiness, based in Salisbury, Maryland. Perdue Foods is a major chicken, turkey, and pork processing company in the United States. Perdue AgriBusiness ranks among the top United States grain companies. Many consumers are willing to pay a significantly higher price for Perdue chicken than for no-name supermarket poultry. Which general indicators of price sensitivity are illustrated by Perdues ability to command a high price?

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B. A UPAD graduate student has a food budget of $100.00/week. To survive with sufficient energy to attend classes, he knows that he needs to consume 50 protein units per week. The only two foods he can stand to eat on a regular basis are beans and hamburger. He derives twice as much pleasure per protein unit from eating hamburger as he does from beans.

a. Assume that hamburger costs $3.00 per protein unit and beans cost $1.00 per protein unit. Formulate the students diet problem as a linear program. (You can assume he wants to maximize his total utility from his diet.) What is the optimal consumption of beans and hamburger in this case?

b. Plot the students price-response curve for beans as the price of beans goes from $1.00 to $2.00, assuming that everything else (including the price of hamburger) stays constant. Note that his individual price-response function is indeed upward sloping. Why? What happens when the price of beans exceeds $2.00 per unit?