Utility {Chapter 4) Problem T Recall Chad from problem 4. Chad consumes protein shakes {IF} and chicken breast {Lg}. Note that Chad's utility function is of the form DIXPJXC) = syn. a} If Chad consumes {ijxc} = (403,5), what is his utility UNCLE}? b) The indifference ourye through [40,5] includes all commodity bundles (xpaxc) such that xpxc is equal to c) The indifference more through {40,5} has the equation x = d) On the graph draiiiir all consumption bundles (xpixc) such that Chad likes exactly as much as the bundle {413,5}. Problem 11 Recall Chad from problems 4 and 7. Chad consumes protein shakes (x,) and chicken breast (x) and Chad's utility function is U(x,..) - x,x,- Suppose the price of a gallon of protein shake is pp = 1, the price if a pound of chicken breast is p. = 2, and Chad's income is 40. a) On the graph plot Chad's budget line. b) On the same graph plot a few points on the indifference curve that gives Chad a utility of 150 and sketch this curve. c) On the same graph plot a few points on the indifference curve that gives Chad a utility of 300 and sketch this curve. d) Can Chad afford any bundles that give him a utility of 150? e) Can Chad afford any bundles that give him a utility of 300? f) On the graph, label (with A) the point which Chad can afford and that gives him a utility of more than 150. 9) Note that neither indifference curve is tangent to the budget line. We need to find this tangent point. Find MRS using the marginal utilities h) What does this MRS tell you at point (1,,x.)? i) What is the slope of Chad's budget line? j Write an equation that implies that the budget line is tangent to the indifference curve at (xp.X.): k) Draw this equation on the graph. I) The best bundle that Chad can afford lies on this line. Label the best bundle that Chad can afford. What is it? m) What is Chad's utility at this bundle? n) Draw the indifference curve through this bundle. Does it touch Chad's budget constraint, cross it, or never touch it?Preferences {Chapter 3 in the book) Problem 4. Chad is an aspiring bodybuilder and consumes dnlyr protein shakes and chicken breast. Dene Chad's consumption bundle as (ijxcl where xp denotes gallons of protein shake and x: denotes pounds of chicken breast. Last week Chad drank 2D gallons of protein shake and ate 5 pounds of chicken breast. It turns out that the set of consumption bundles (xpixc) so that Chad is indifferent between {xpixc} and the bundle (EDIE) is the set of all bundles such that xc = 1%\". The set of bundles {xpjxd such that Chad is indifferent between (xpixc) and the bundle {11115) is the set of bundles such that L: = 13%;)
