Practice question for my final exam

Rita has a budget of 600 to spend on theatre tickets (X) and on restaurant meals (Y ). Each theatre ticket is priced at 60 (denoted by PX), whereas the price of a restaurant meal (Py) is 30. Her utility function is U (X, Y) = 8%}? + Y, which gives marginal utilities MUX = % and MUY = 1. Her indifference curves are convex to the origin. (a) Find the equation of Rita's budget line. Explain how Rita decides to spend her budget with the aid of a diagram. [6 marks] (b) Find the number of theatre tickets and restaurant meals Rita purchases. [6 marks] (0) Rita receives a pay rise and so increases her budget for theatre tickets and restaurant meals to 660. Find the number of theatre tickets and restaurant meals Rita now purchases. [6 marks] (d) For Rita are theatre tickets and restaurant meals normal goods, inferior goods or not associated with income? [6 marks] (e) Suppose the price of restaurant meals falls. How do you expect Rita's demand for theatre tickets to change? Explain with reference to substitution and income effects. [6 marks]