Question
Tien receives utility from days spent traveling on vacation domestically (D) and days spent traveling on vacation in a foreign country (F), as given by
Tien receives utility from days spent traveling on vacation domestically (D) and days spent traveling on
vacation in a foreign country (F), as given by the utility function U(D,F)=5DF. In addition, the price of a day
spent traveling domestically is $100, the price of a day spent traveling in a foreign country is $400, and Tien's
annual travel budget is $4000.
a. Illustrate the indifference curve associated with a utility of 800 and the indifference curve associated
with a utility of 1200.
b. Graph Tien's budget line on the same graph.
c. Can Tien afford any of the bundles that give her a utility of 800? What about a utility
of 1200?
d. Find Tien's utility maximizing choice of days spent traveling domestically and days spent in a foreign
country.
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