Question: Question 1 {2D marks}. Tom consumes only beer {5] and whisky {W}. His utility function is more} = so +5W. where B is the quantity

Question 1 {2D marks}. Tom consumes only beer {5] and whisky {W}. His utility function is more} = so +5W. where B is the quantity of beer and W is the quantity of whisky. The price of beer is P5 = 2. the price of whisky is PW = 5. and Tom's income is M = 2|] dollars. [a] J{Lib'tain the equation of Tom's indifference curves for the utility E 2:: l] with beer in the horizontal axis and whisky in the vertical axis. 1lll'll'hat is the magnitude of the slope of Tom's indifference curves? Explain the economic meaning of this magnitude. Are Tom's indifference curves vertically parallel? Explain. [5 marks] (b) Obtain the equation of Tom's budget line. What is the magnitude of the slope of the budget line? What is the economic intemretation of this magnitude? Does Tom consume beer at the current prices (indicated above}? Explain in detail. [5 marks] {c} Are Tom's preferences quasi-linear? Are they homothetic? Justify each of your answers. (5 marks} {d} Tom's brother. Jerry. has a utility function given by V[B,H} = max{B1H}. {d1} Are Jerry's preferences conyex? Are they strictly convex? Justify your answers. {2 marks) {d3} Are Jerry's preferences complete? Explain. {1.5 marks] {d3} Are Jerry's preferences transitive? Explain. (1.5 marks]

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