SOLUTION AT Australian Expert Writers
Good X sells for $4, and good Y sells for $2. At your current level of consumption, the marginal rate of substitution between X and Y is 4.
a. Draw an indifference curve and budget constraint that reflects the facts given above. (Hint: You will have to choose an initial income level and an initial bundle of X and Y.) b. Are you maximizing your utility? c. If you are not maximizing your utility, are you buying too much X or too much Y? Explain. 14. Andre gets utility from playing laser tag and reading books. Each week, Andre spends his entire $100 paycheck on both goods. One hour of laser tag costs $20; a book costs $10. a. Graph Andre’s budget constraint. Put books on the horizontal axis and hours of laser tag on the vertical axis. b. When Andre max1m1zes his utility, he buys 6 books. Carefully add an indifference curve to your graph to reflect Andre’s utility-maximizing bundle of books and laser tag. c. When Andre maximizes his utility, how many hours of laser tag does he play? d. When Andre maximizes utility, the marginal utility he receives from playing an extra hour of laser tag is 12 utils. How much utility must Andre get from reading another book?
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