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Angela derives utility from Coca-Cola (C) and attending rock concerts

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Question;Angela derives utility from Coca-Cola (C) and attending rock concerts (R). Her utilityfunction is U(R,C) = C0.9R0.1, where C and R are the number of colas and rock concertsconsumed per year, respectively.A. If the price of colas is $1 and the price of concert tickets is $30, and Angela?s incomeis $300, how many colas and concert tickets will she buy to maximize utility? Verify thatMRS = MRT at the optimal solution.B. Suppose the promoters of the rock concert make the following requirement: Eitherbuy four rock concert tickets or none at all. Under this constraint, and given the pricesand income above, how many colas and rock concerts will Angela buy to maximizeutility? Verify that MRS? MRT at the optimal solution.

 

Paper#56750 | Written in 18-Jul-2015

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