Youre in love Charlie Brown! Prior to meeting that little girlwith the red hair, Charlie Browns utility
Question:
You’re in love Charlie Brown! Prior to meeting that little girlwith the red hair, Charlie Brown’s utility function was givenby
U(C,R) = 3C +2R
C denotes candy (at $4 per box) and R denotes long stem roses(at $3 per rose). Charlie has $24 to spend.
Upon catching a glimpse of his heartthrob, Charlie’s tasteschange and so does his utility function. The new utility functionis given by
U(C,R) = C2 + 2R2
Calculate the utility maximizing choice of Charlie before hesees the red headed girl. Calculate the consequent utility level.Plotting C along the horizontal axis and R along the vertical axisillustrate your answer with a suitable graph.
Calculate the utility maximizing choice (which Snoopy does notapprove!) after Charlie goes gaga over the redheaded girl. Assumeunchanged prices and budget. Calculate the consequent utilitylevel. Explain your answer with a suitable graph.
Management Science The Art of Modeling with Spreadsheets
ISBN: 978-1118582695
4th edition
Authors: Stephen G. Powell, Kenneth R. Baker