Question
There are two goods: servings of vegetables v and number of cookies c. As an economist, a parent wishes to use economics to encourage healthy
There are two goods: servings of vegetables v and number of cookies c. As an economist, a parent wishes to use economics to encourage healthy eating by his child, Ricardo. Therefore, the parent charges Ricardo $1 for each cookie he eats but pays Ricardo $2 for every serving of vegetables he eats. As an additional check to ensure healthy eating, Ricardo is allowed a maximum of 10 cookies. Ricardo is also given an allowance of $5.
Note: there is no time dimension here. For example, Ricardo cannot save cookies for later or consume cookies that were saved previously.
a. Make a graph with the servings of vegetables v on the horizontal axis and the number of cookies c on the vertical axis. Draw the budget set, specifying the bundles at any intercepts or kinks.
b. Ricardo hates vegetables but likes cookies. Suppose Ricardo's preferences for vegetables and cookies can be represented by the utility function
????(????,????) = c/(v + 6)^2
How many servings of vegetables and number of cookies will Ricardo consume?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started