Question: 1.Brad buys apples and bananas.His utility function is given by U ( a, b )= 2 a .375 b .625 The price of a lb.

1.Brad buys apples and bananas.His utility function is given by

U ( a, b )= 2 a.375b.625

The price of a lb. of apples=$5/lb.

The price of a lb. of bananas=$5/lb.

Brad has $80 to spend on apples and bananas.

a.What is the equation of Brad's budget line?

b.Solve for Brad's optimal bundle

c.If a tax raises the price of apples to $10/lb., what will Brad's new optimal bundle be?

d.What share of Brad's budget was spent on apples before the tax?After the tax?

e.How are Brad's optimal bundles related to his utility function?

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