U(G, S) = GS .

Suppose that the price of Game is p_G= 1, the price of Shoes is p_S = 3, and Jerry's Income is. I = 40. What bundle of games and shoes (G, S) maximizes Jerry's utility?

We know its G = 3S + 3(20/3) = 20

Bundle of games and shoes ( G, S ) = ( 20, 20/3) = (G,S)

Games = 20

Shoes = 20/3 = 6.67

What we need to figure out is the question below:

Given the price increase, How much income does Henry need to remain as happy (have the utility) as he was before the price change? What bundle of game and shoes would Henry consume if he had that additional income, given the new prices? Show your work an illustrate graphically.

Before: (G , S) = 20, 20/3 = 6.67

( G , S ) = 5 , 20/3