Miss Muffet always likes to have things “just so.” In fact the only way she will consume her curds and whey is in the ratio of 2 units of whey per unit of curds. She has an income of $20. Whey costs $.75 per unit. Curds cost $1 per unit. On the graph below, draw Miss Muffet’s budget line, and plot some of her indifference curves.

(a) How many units of curds will Miss Muffet demand in this situation? _______. How many units of whey? _________. 

(b) Write down Miss Muffet’s demand function for whey as a function of the prices of curds and whey and of her income, where p_c is the price of curds,p_w is the price of whey, and m is her income. D(p_c, p_w, m) = ________.  You can solve for her demands by solving two equations in two unknowns. One equation tells you that she consumes twice as much whey as curds. The second equation is her budget equation.)

Transcribed Image Text:

Whey 32 y = 2c 24 16 Indifference curves Budget line 16 8 24 32 Curds My