Jake likes to eat cereal. He is able to purchase his favorite cereal in two different sized box: 8 oz and 32 oz cereal in a box of any size is identical, therefore Jake regards these two goods as perfect substitutes. Assume that Jake's utility depends only on the quantity of cereal he buys, but not on the size of a container. Also assume that Jake is better off when he consumes more cereal. (a) Write down Jake's utility function in terms of quantities of 32 oz containers (x) and 8 oz containers (y). (b) Let px and py denote market prices of 32 oz and 8 oz cereal containers, respectively. Let I denote the income that Jake allocates for her monthly purchases of cereal. Write down Jake's utility maximization problem and find Marshallian demand functions for each good. (c) Let the price of 8 oz containers be py = $1.25. Let Jake allocate I = $20 per month to purchase cereal. Plot Jake's demand function for 32 oz containers as a function of px. (d) Suppose, the current price of a 32 oz cereal box is $4. How much cereal will Jake consume each month? What utility level will he get

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