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Please write down the answer and draw the graph clearly. Jennifer’s income is $120. her utility...

Please write down the answer and draw the graph clearly. Jennifer’s income is $120. her utility from fish and cabbage is U = .2F2C2 If the price of fish is $3 and the price of cabbage is $6,

  1. What is the optimal bundle of fish and cabbage to consume?   At this optimal bundle, what is Jennifer’s utility?

  1. Suppose the price of fish jumps to $6. What income would be required to purchase the bundle that you computed in (a)?

  1. Draw a diagram represents the optimal bundles in (a) and the change in the budget line as price of fish and income increase as described in (b).

  1. Does Jennifer maximize her utility if she consumes the combination of bundle in (a) when the price of fish increases to $6 and she also receives the raise based on your calculation in (b)?

  1. Use the same graph as in (c) to determine the substitution and income effects when the price of fish jumps from $3 to $6 and the income rises based on your calculation in (b).
  1. Calculate Jennifer’s combination of F and C at the substitution effect point. [Hint: What would be Jennifer’s optimal bundle if she is to keep the same utility, give the conditions (Price of fish increases to $6 and her income also increases as your calculation in (b)?]

  1. Given your answer in (a), suppose that instead of having an income of $120, Jennifer had an income of $50 and had fish stamps that were worth $130. How would the budget constraint change? How would Jennifer’s optimal bundle change? Graph and explain your result.
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