Question

Karen has preferences over reading books, r and cups of coffee, c, represented by the utility function u(r, c) = min{r, c}

She is endowed with positive amounts of both goods, (ωr, ωc)=(100,100), respectively and faces prices pr, pc. 1.

Are the consumer’s preferences convex? Are the consumer’s preferences monotone? Explain your answer graphically.

2. Assume pc = 10 (thus, pr represents the price of books relative to cups of coffee). Solve for the Marshallian demand for books read, r and cups of coffee, c given price pr and endowments (100, 100).

Answer 1