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1. The table gives the total utility Jamal derives from the consumption of cupcakes and cream puffs. Jamal has $13 to spend on these two confectionery goods. The price of a cupcakes is $1 and the price of a cream puff is $2. a) In order for Jamal to maximize his utility, how many cupcakes and cream puffs should he buy? b) Jamal's income changes to $16 but no changes in price of both goods. What combination of cupcakes and cream puffs will Jamal buy now? 6 4 6 7 2. The table above gives the utility from pens and pencils. If pens and pencils both cost $.25 each and the consumer has an income of $2.25, what is the consumer's equilibrium? Quantity Total utility Quantity Total of pens from pens of pencils utility from pencils 0 0 0 0 1 90 1 70 2 155 2 120 3 200 3 150 4 225 4 165 5 240 5 174 6 246 6 176 3. Olivia's income is $150 a year and she spends all of it on music CDs and movies on DVDs. The price of a music CD is $8 and the price of a DVD is $10. a) What is Olivia's real income in terms of CDs? What is her real income in terms of DVDs? b) Draw a graph of Olivia's budget line (with CDs on the horizontal axis). What is the slope of Olivia's budget line? What determines its magnitude? 14 DVDs per year) 12 10 4. Olivia's income is $216 a year and she spends all of it on music CDs and movies on DVDs. The price of a music CD is $18 and the price of a DVD is $18. The figure above illustrates Olivia's preferences. What quantities of CDs and DVDs does Olivia buy? Explain your solution. 8 6 4 2 o 2 6 8 10 12 14 16 18 20