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Microeconomic Theory 11th Edition by Walter Nicholson,Christopher Snyder
Edition 11ISBN: 978-1111525538Microeconomic Theory 11th Edition by Walter Nicholson,Christopher Snyder
Edition 11ISBN: 978-1111525538 Exercise 1
Each day Paul, who is in third grade, eats lunch at school. He likes only Twinkies (t) and soda (s), and these provide him a utility of
a. If Twinkies cost $0.10 each and soda costs $0.25 per cup, how should Paul spend the $1 his mother gives him to maximize his utility?
b. If the school tries to discourage Twinkie consumption by increasing the price to $0.40, by how much will Paul's mother have to increase his lunch allowance to provide him with the same level of utility he received in part (a)?
a. If Twinkies cost $0.10 each and soda costs $0.25 per cup, how should Paul spend the $1 his mother gives him to maximize his utility?
b. If the school tries to discourage Twinkie consumption by increasing the price to $0.40, by how much will Paul's mother have to increase his lunch allowance to provide him with the same level of utility he received in part (a)?
Explanation
Verified
Verified
a) P's utility function is
His budget ...
Microeconomic Theory 11th Edition by Walter Nicholson,Christopher Snyder
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