Question: This is my question Problem 2 (40 pts) Explain your answers! Andy consumes only coffee and sandwiches and has a utility function iii-(ml, m2} =
This is my question

Problem 2 (40 pts) Explain your answers! Andy consumes only coffee and sandwiches and has a utility function iii-(ml, m2} = 31n(m1} + 5111(32} where 931 is the quantity of coffee and 322 is the number of sandwiches consumed. ln[:c} denotes the natural logarithm of 3:. Suppose a coffee costs $2 and a sandwich costs $p. Andyls income is $111. (a) 1'Jlfrite down Andy's consumer '3 problem of choosing his optimal consumption bundle. (b) Find Andy's demand function for sandwiches. How does it depend on p and m [increas ing, decreasing, constant}? Are sandwiches an ordinary good for Andy? Explain why or why not. (c) Find the equation of Andyls Engel curse Jfor sandwiches [i.e., express no in terms of mg} Are sandwiches a normal good for Andy? (d) How many coffees and sandwiches would Andy consume if his income is m : $12G and a sandwich costs 3} = $5? Starting from that, how would Andy's optimal consumption bundle change if a $1 quantity tax is imposed on coffee and Andy is given $15 lumpsum subsidy to his income? Is he better oif or worse off after the tax and subsidy compared to before? (e) Jenny also consumes only coifee (at price $2) and sandwiches [at price $11?) but has the utility function 2331 + 251n[932). If her income is $55 and p = $5 Jfind her optimal consumption bundle. What quantities of coffee and sandwiches would Jenny consume if her income was $10 instead
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