Question: Crystal s utility function is given by U ( B , C ) = B * C , where B is the number of burgers
Crystals utility function is given by UBCBC where B is the number of burgers per
week and C is the number of packs of cigarettes per week. Thus, MUBC and MUCB
a What is the equation for the marginal rate of substitution?
b If her income is $ per week, and prices are PB and PC how many burgers and
packs of cigarettes does she purchase to maximize her utility?
c The government wants to cut down the consumption of one these items so it taxes
burgers, which increases PB to $ Now what are the optimal choices of B and C for
Crystal?
d On the same graph, illustrate your answers to parts b and c
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