Question
John allocates 60 per week to pizza and views two 'small' pizzas (S) as being identical to one 'large' pizza (L). John must pay 6
John allocates 60 per week to pizza and views two 'small' pizzas (S) as being identical to one 'large' pizza (L). John must pay 6 for a small pizza and 10 for a large one. (a) With Large pizzas on the horizontal axis, draw John's budget line and relevant indifference curves. Outline and explain a possible utility function for John. (b) Determine how many small and large pizzas John buys each week to maximise his utility. Show on the diagram in (a). (c) How will John's consumption bundle change if the price of a small pizza drops to 4? Show on the diagram in (a). Explain any difference from (b)
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