Question
Assume the price of beer is $4, the price of pizza is $10 and the consumer's...
Assume the price of beer is $4, the price of pizza is $10 and the consumer's income is $340. If the consumer's preference can be expressed as U(b,z)=b^(3⁄4) z^(1⁄4) {^ means power}. Now, the price of beer increases from $4 to $5 and everything else remains the same, what is the optimal bundle? Hint: MUb=3/4*b^(-1/4)*z^(1/4) and MUz=1/4*b^(3/4)*z^(-3/4).
A. 63.75 beers 8.5 pizza
B. 51 beers 8.5 pizza
C. 30 beers 10 pizza
D. None of the above
Homework Answers
Answer #1
B)
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