Suppose you have preferences for pizza (z) and soda (d). The price of pizza, pz = 5.00 and the price of soda, pd = 2.00. You have an income of I = 20 that you can spend on pizza and soda every week. Suppose you like to always consume 3 pieces of pizzas with 2 cups of soda. •(i) What type of preference do you have for pizzas and sodas? •(ii) Derive the utility function for pizza and sodas •(iii) Solve for your optimal consumption of pizza and sodas •(iv) Illustrate your answer to (iii) on a graph, include your indifference curve, the budget constraint, the slope of the budget constraint, and all labels.
Suppose you have preferences for pizza (z) and soda (d). The price of pizza, pz = 5.00 and the price of soda, pd = 2.00. You have an income of I = 20 that you can spend on pizza and soda every week. Suppose you like to always consume 3 pieces of pizzas with 2 cups of soda. •(i) What type of preference do you have for pizzas and sodas? •(ii) Derive the utility function for pizza and sodas •(iii) Solve for your optimal consumption of pizza and sodas •(iv) Illustrate your answer to (iii) on a graph, include your indifference curve, the budget constraint, the slope of the budget constraint, and all labels.
Chapter10: Consumer Choice Theory
Section: Chapter Questions
Problem 6P
Related questions
Question
Suppose you have preferences for pizza (z) and soda (d). The price of pizza, pz = 5.00 and the price of soda,
pd = 2.00. You have an income of I = 20 that you can spend on pizza and soda every week.
Suppose you like to always consume 3 pieces of pizzas with 2 cups of soda.
•(i) What type of preference do you have for pizzas and sodas?
•(ii) Derive the utility function for pizza and sodas
•(iii) Solve for your optimal consumption of pizza and sodas
•(iv) Illustrate your answer to (iii) on a graph, include your indifference curve, the budget constraint,
the slope of the budget constraint, and all labels.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc
Economics: Private and Public Choice (MindTap Cou…
Economics
ISBN:
9781305506725
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
Microeconomics: Private and Public Choice (MindTa…
Economics
ISBN:
9781305506893
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc
Economics: Private and Public Choice (MindTap Cou…
Economics
ISBN:
9781305506725
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
Microeconomics: Private and Public Choice (MindTa…
Economics
ISBN:
9781305506893
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:
9781337617383
Author:
Roger A. Arnold
Publisher:
Cengage Learning