Question
Linda loves buying shoes and going out to dance. Her utility function for pairs of shoes, S, and the number of times she goes dancing
Linda loves buying shoes and going out to dance. Her utility function for pairs of shoes, S, and the number of times she goes dancing per month, T, is U(S,T) = 2 ST. What is her marginal utility from shoes and what is her marginal utility from dancing? It costs Linda $50 to buy a new pair of shoes or to spend an evening out dancing. Assume that she has $500 to spend on clothing and dancing. a. What is the equation for Linda's budget line? Draw it (with T on the vertical axis), and label the slopes and intercepts. b. What is her marginal rate of substitution? Explain. c. Solve mathematically for her optimal bundle. Show in a diagram how to determine this bundle using indifference curves and a budget line.
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