Joel has an income of $96, which he can spend on two (normal) goods: movies and...
Joel has an income of $96, which he can spend on two (normal) goods: movies and pizzas. Each movie costs $12 and each pizza costs $8.
(a) Joel is considering buying bundle A, which is 3 movies and 5 pizzas. At that bundle, his marginal rate of substitution is 3 pizzas for 2 movies. Is the proposed bundle Joel’s optimal consumption bundle? If not, explain whether and why Joel buy more or fewer of each good to increase his utility.
(b) Illustrate consumption bundle A on a graph. If A is not the optimal bundle, also illustrate the optimal bundle (labeled B) on the same graph. Be sure to include and label all relevant lines, curves, and points.
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Joel has an income of $96, which he can spend on two (normal)
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