A child budget is 3 dollars and she has two options:

1)ice cream 

2) cake. 

Her utility function is u(x,y)=yx². The first five ice cream cones are free but each additional cone will cost 1$. Cakes are 1$ at any amount. 

1) Find an optimal bundle. What will happen with optimal bundle if she has $2 budget. 

2) Find and draw budget set. What will happen with budget set if the child has 2$ budget but now she has 3 free cakes in additional to ice cream cones.

Answer rating: 100% (QA)

For first 3 cOkes Comes she cam have at most For a... View the full answer