Question

Vasco likes spare ribs q1, and fried chicken, q2. His utility function is U=10q1^2 * q2. His weekly income is $90, which he spends on ribs and chicken only.

a. If he pays $10 for a slab of ribs and $5 for a chicken, what is his optimal consumption bundle? Show his budget line, indifference curve, and optimal bundle, e1, in a diagram.

b. Suppose the price of chicken doubles to $10. How does his optimal consumption of chicken and ribs change? Show his new budget and optimal bundle, e2, in your diagram.

**Please do not use Lagrangian's Equation (if that's even applicable here). My professor will not accept that**

Answer 1

Ucq, q) = 109, e a At optiniality Mesmo - 2091 92 220 - 2 102 budget gut lege- Income 10q, & 5. = 90 Vo If Pernie of Chicken to $10 then q = 2M 90X2 6 3x10 49 = 1/2