Answered step by step
Verified Expert Solution
Link Copied!

Question

...
1 Approved Answer

Pan Man gets utility from consuming pancakes which are made out of flour and sugar. All inputs are measured in cups. He cannot combine the

Pan Man gets utility from consuming pancakes which are made out of flour and sugar.

All inputs are measured in cups.

He cannot combine the two ingredients in very different quantities. The ratio of flour and sugar it uses must fall between 1:2 and 2:1. Otherwise the pancakes will fall apart, and the Pan Man will get no utility. He must discard any amounts of the two inputs that outside these ratios. Pan Man's utility from pancakes that do not fall apart is:

U(F, S) = FS

Where F is the number of cups of flour and S the cups of sugar.

(a) Draw a graph (with 2 units each on both axes): draw a red line through all combinations of flour and sugar that are in the ratio 1 to 2. Draw a blue line through combinations of flour and sugar that are in the ratio 2 to 1. (If you do not have colours, just label them "red" and "blue".)

(b) How much utility does the Pan Man get from the following bundles of flour and sugar:

U(2, 12) = ____________ U(4, 10) = _________________ U(8, 4) = ____________ U (10, 4) = _________________

(c) Neatly draw an indifference curve between all combinations of flour and sugar that represents the preferences of Pan Man and gives him a utility of 32.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Statistics For Engineers And Scientists

Authors: William Navidi

3rd Edition

9780073376332

Students also viewed these Economics questions