Johnny continues to consume burgers and steaks. His utility function is U(xB; xS) = xBxS. The price of burgers is $1, the price of steak is $2, and his income is $40 a day.

Remember Johnny, who was buying burgers and steaks? Johnny has 40  burgers and 5 steaks.

a) What is the level of Johnny's utility for the bundle (40,5)?

b) Write the formula for the indifference curve going through (40,5).

Donna offers to give Johnny 15 steaks if he will give her 25 burgers.

c)Would Johnny have a bundle that he likes better than (40,5) if he made this trade?

d) What is the largest number of burgers that Donna could demand from Johnny in return for 15 steaks if she expects him to be willing to trade or at least be indifferent about trading?

Answer rating: 100% (QA)

a Utility405 405 200 b Indifference curve passing through 4... View the full answer