Erin has $8.00 to spend only on bagels (B) and muffins (M). Bagels cost $0.40 each,...
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Erin has $8.00 to spend only on bagels (B) and muffins (M). Bagels cost $0.40 each, and muffins cost $0.10 each. Suppose that Erin has preferences for bagels and muffins given by the utility function U = √√BM. 2.1 Find Erin's equation of her budget constraint and represent it graphically. 2.2 If B = 5 and M = 80, what will the utility be? 2.3 If B = 10, what value for M will provide the same utility as in 2.2? 2.4 If B = 20, what value for M will provide the same utility as in 2.2? 2.5 Graph the indifference curve using the combinations of B and M from 2.2 – 2.4 2.6 Given the budget constraint from 2.1, which combinations of B and M can be bought by Erin? Erin has $8.00 to spend only on bagels (B) and muffins (M). Bagels cost $0.40 each, and muffins cost $0.10 each. Suppose that Erin has preferences for bagels and muffins given by the utility function U = √√BM. 2.1 Find Erin's equation of her budget constraint and represent it graphically. 2.2 If B = 5 and M = 80, what will the utility be? 2.3 If B = 10, what value for M will provide the same utility as in 2.2? 2.4 If B = 20, what value for M will provide the same utility as in 2.2? 2.5 Graph the indifference curve using the combinations of B and M from 2.2 – 2.4 2.6 Given the budget constraint from 2.1, which combinations of B and M can be bought by Erin?
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