Stewie Spends All of His Income on Movie Rentals (R)

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The Answer is Start with the utility maximizing condition 20/√R = P_R/P_N = $2/$1. Solving for R yields R = 100, implying Stewie spends $200 on movie rentals. That means he spends $2(M-200) on noodles. So, for income levels less than $200, Stewie only rents movies. His incomeconsumption curve, his Engle curve for movie rentals and his Engel curve for noodles are shown in Figure 5.14.
Start with the utility maximizing condition 20/√R = P<sub>R</sub>/P<sub>N</sub> = $2/$1. Solving for R yields R = 100, implying Stewie spends $200 on movie rentals. That means he spends $2(M-200) on noodles. So, for income levels less than $200, Stewie only rents movies. His incomeconsumption curve, his Engle curve for movie rentals and his Engel curve for noodles are shown in Figure 5.14.

Start with the utility maximizing condition 20/√R = P<sub>R</sub>/P<sub>N</sub> = $2/$1. Solving for R yields R = 100, implying Stewie spends $200 on movie rentals. That means he spends $2(M-200) on noodles. So, for income levels less than $200, Stewie only rents movies. His incomeconsumption curve, his Engle curve for movie rentals and his Engel curve for noodles are shown in Figure 5.14.

Stewie Spends All of His Income on Movie Rentals (R)

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Stewie Spends All of His Income on Movie Rentals (R)

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