Stephen has $4,000 to spend on cakes and movies. The price of a cake (C) is $40 and the price of a movie (M) is $20. Suppose that Stephen’s utility function is U(C,M) =C3/4 M1/4 . Graph his budget constraint and an indifference curve indicating the utility maximizing choices of C and M. Put cake (C) on the vertical axis. What is Stephen’s marginal utility of cake at his utility maximizing choice?
Stephen has $4,000 to spend on cakes and movies. The price of a cake (C) is $40 and the price of a movie (M) is $20. Suppose that Stephen’s utility function is U(C,M) =C3/4 M1/4 . Graph his budget constraint and an indifference curve indicating the utility maximizing choices of C and M. Put cake (C) on the vertical axis. What is Stephen’s marginal utility of cake at his utility maximizing choice?
Chapter7: Consumer Choice: Maximizing Utility And Behavioral Economics
Section: Chapter Questions
Problem 6QP
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Stephen has $4,000 to spend on cakes and movies. The price of a cake (C) is $40 and the price of a movie (M) is $20. Suppose that Stephen’s utility function is U(C,M) =C3/4 M1/4 .
Graph his budget constraint and an indifference curve indicating the utility maximizing choices of C and M. Put cake (C) on the vertical axis.
What is Stephen’s
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