Question

A) Mary hates coke and hamburgers (but she is polite enough to eat/drink them whenever served). Her disutility is determined by (i) the amount of hamburgers she has to eat if it is at least as high her consumption of coke (in half liters) or (ii) coke (in half liters) she has to drink if this is higher than the amount of hamburgers she has to eat. Represent her preferences in a graph and indicate the direction of increasing utility.

B) A teacher consumes only two different drinks, apple juice and coke. His utility is equal to the drink of which he consumes fewer bottles. Suppose his drinking budget per day of lectures is 5€. Derive his optimal consumption decision if the price of apple juice is pA = 1€ per bottle and the price of coke is pC = 1.50€ per bottle.

Answer 1