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Margot the octopus has 5 right legs and 3 left legs. She is crazy about shoes, and will only wear matching shoes on all her
Margot the octopus has 5 right legs and 3 left legs. She is crazy about shoes, and will only wear matching shoes on all her 8 legs. Her utility function is given by U(q1,q2) = min[3q1,5q2], where (11 is the number of right shoes and qz is the number of left shoes. Assume that Margot's income is I= $70 and the prices of right and left shoes are p1=$4 and p2=$5 respectively. a) Draw the budget line for Margot and several of her indifference curves. Put right shoes on horizontal axis. Show the optimal bundle on the diagram. b) Calculate her optimal bundle how many right and left shoes she will buy. What happens when price changes? c) Suppose that price of right shoes increases to $11. Calculate the new optimal bundle and show it on a diagram
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