Question
Mike also likes apples and bananas.The utility function (utility) of it is ( A , B ) = A + B .What is required are
Mike also likes apples and bananas.The utility function (utility) of it is (A, B) = A + B.What is required are the demand functions for apples, A (A, B, ) and for bananas B (pA, pB, m.).
a)If the prices of apples and bananas are A and B respectively and the income is m, calculate the slope of the income constraint, the slope of the indifference curve and write the equation that shows that the two curves are tangent.
b)Now calculate the demand functions for apples, A(A, B, ) and for bananas B (A, B, ).
c)What is the percentage of income spent on apples and what is the percentage of income spent on bananas?
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Managerial Economics and Business Strategy
Authors: Michael R. baye
7th Edition
978-0073375960, 71267441, 73375969, 978-0071267441
