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#4 Given an income/budget equation, $1,500 = $10Wine + $5Crackers and assume a utility function U...

#4

Given an income/budget equation, $1,500 = $10Wine + $5Crackers and assume a utility function U = (W^.75C^.25)

a) put wine on the x axis and crackers on the y axis, and find both intercept points and solve for and graph a budget constraint for these two goods. label the optimal quantity as W0 and C0. let income rise to $2500, keeping prices constant.

b) find the engel curves for wine and crackers

c) what sort of good is wine? what sort of good are crackers? how do you know?

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