Anne insists on consuming strawberries with cream. She does not, however, insist on consuming the same...

 

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Anne insists on consuming strawberries with cream. She does not, however, insist on consuming the same amount every week. Her utility function is U min (81;2c₁) min (82,203) (1) where s1 and 82 are the number of boxes of strawberries she consumes this week and next week, correspond- ingly, and c, and c, are the boxes of cream she consumes this week and next. Strawberries cost 2 EUR a box and cream costs 1 EUR the box. She has a present value income of 100 EUR to spend on these goods 1 in the next two weeks. The weekly interest rate is 1% VANCERI a) Write the equation of the budget constraint and draw it. Indicate clearly the endowinent point. b) How many boxes of strawberries will she consume this week and the second week? How much cream Draw the optimal choice using the graph you draw in point 1. Anne insists on consuming strawberries with cream. She does not, however, insist on consuming the same amount every week. Her utility function is U min (81;2c₁) min (82,203) (1) where s1 and 82 are the number of boxes of strawberries she consumes this week and next week, correspond- ingly, and c, and c, are the boxes of cream she consumes this week and next. Strawberries cost 2 EUR a box and cream costs 1 EUR the box. She has a present value income of 100 EUR to spend on these goods 1 in the next two weeks. The weekly interest rate is 1% VANCERI a) Write the equation of the budget constraint and draw it. Indicate clearly the endowinent point. b) How many boxes of strawberries will she consume this week and the second week? How much cream Draw the optimal choice using the graph you draw in point 1.

Answer rating: 100% (QA)

To find Annes optimal consumption we need to maximize her utility function subject to her budget constraint Lets proceed step by step a The budget constraint equation The total amount Anne can spend o... View the full answer