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Sara always drinks vodka martinis in exactly the same way. She uses 2 parts vodka (V) and 1 part olive brine (O) in every drink.
Sara always drinks vodka martinis in exactly the same way. She uses 2 parts vodka (V) and 1 part olive brine (O) in every drink. a) What is her utility function for vodka and olive brine? b) Sara spends $30 on vodka martinis every night and the price of vodka and olive brine are $5 and $1 respectively. What is Sara's utility-maximizing bundle of vodka and olive brine? Show full detailed step by step calculation. c) Suppose the price of vodka increases to $8 while the price of olive brine did not change. What is her new utility-maximizing bundle of vodka and olive brine? Show full detailed step by step process. d) Depict parts b. and c. with a diagram that shows both budget constraints, indifference curves and utility maximizing bundles
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