Question
the Sad Clown needs your help to maximize his happiness. He tells you that his joy is derived from the consumption of two goods, balloons
the Sad Clown" needs your help to maximize his happiness. He tells you that his joy is derived from the consumption of two goods, balloons and cotton candy, according to the following utility function; U = B2/5C3/5 (meaning his MRS = 2C / 3B).
a) Find Wisepenny's optimal demand functions for balloons (B) and cotton candy (C).
b) If Wisepenny has an income of $500 and faces prices PB = 1 and PC = 3 then what quantities of balloons and cotton candy will maximize his utility (making "Wisepenny the Sad Clown" into "Wisepenny the Happy Clown" )?
c) Recalling that Wisepenny's utility function is U = B2/5C3/5 what is the utility value that he can achieve given your answer from part b)?
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