a) What is the utility maximizing choice of food and clothing? b) How would the utility maximizing choice change if price of clothing increased to $14? c) Given the answers to the previous parts plot a linear approximation to the demand function for clothing.
a) What is the utility maximizing choice of food and clothing? b) How would the utility maximizing choice change if price of clothing increased to $14? c) Given the answers to the previous parts plot a linear approximation to the demand function for clothing.
Chapter6: Consumer Choice Theory
Section: Chapter Questions
Problem 16SQ
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A consumer’s preferences for food (F) and clothing (C) are given by U(F,C) = F0.2C0.8. The price of food is $4, and the price of clothing is $8. The consumer has an income of $3600.
a) What is the utility maximizing choice of food and clothing?
b) How would the utility maximizing choice change if price of clothing increased to $14?
c) Given the answers to the previous parts plot a linear approximation to the demand function for clothing.
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