Question: Please show all steps and derivations. Make sure that your graphs and all their axes are correctly and neatly labelled. Q . Lucy works in
Please show all steps and derivations. Make sure that your graphs and all their axes are correctly and neatly labelled.
Q Lucy works in her family farm and gets paid $M The only goods that she consumes are rice and wheat w Her utility function for these two goods is given as:
Ur w Inr w
a What is Lucy's MRS for rice and wheat?
b If the price of rice is denoted as P and the price of wheat is denoted as Pw derive Lucy's demand functions for rice and wheat Hint: consider all possible cases of prices and income
c IfM $ P and Pw what is the quantity of rice and wheat that will maximise her utility? Graphically illustrate Lucy's budget line, indifference curve and the optimal bundle in this case.
d Considering prices to be the same as part c above, graphically illustrate Lucy's Engel curve for rice. Make sure to mark its slope.
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