Question
Ann lives on cheese and wine. The price of cheese is 6 dollar per pound and the price of wine is 10 dollars per liter.
Ann lives on cheese and wine. The price of cheese is 6 dollar per pound and the price of wine is 10 dollars per liter. For simplicity, assume both cheese and wine are infinitely divisible. Ann allows herself to spend no more than 120 dollars per week. Also, Ann is on diet. Her dietitian restricts her consumption to 18000 calories per week. There are 1800 calories in every pound of cheese and 1000 calories in every liter of wine. Ann likes to consume cheese and wine in fixed proportions and her utility function is U(x; y) = min(2x,y), where x is the amount of cheese (in pound) and y the amount of wine (in liters) Ann consumes per week. (1) Draw Ann's feasible set of bundles that satisfy both her budget and calorie constraints. On the same diagram, draw some of Ann's indifference curves. (2) What is Ann's optimal choice given both her budget and calorie con- straints?
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