Brenda wants to buy a new car and has a budget of $25,000. She has just found
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a. Illustrate the various combinations of style (S) and gas mileage (G) that Brenda could select with her $25,000 budget. Place gas mileage on the horizontal axis.
b. Suppose Brenda’s preferences are such that she always receives three times as much satisfaction from an extra unit of styling as she does from gas mileage. What type of car will Brenda choose?
c. Suppose that Brenda’s marginal rate of substitution (of gas mileage for styling) is equal to S/(4G). What value of each index would she like to have in her car?
d. Suppose that Brenda’s marginal rate of substitution (of gas mileage for styling) is equal to (3S)/G. What value of each index would she like to have in her car?
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