Question: V John loves buying beer and wine. His utility function for gallons of beer per year, B, and gallons of wine per year, W, is

V John loves buying beer and wine. His utility function for gallons of beer per year, B, and gallons of wine per year, W, is U(B,W) = 10BZW. It costs John N$20.00 to buy a gallon of beer and it costs John N$45.00 to buy a gallon of wine. Assume that he has N$1000.00 to spend on beer and wine. a) What is the equation for his budget line? Draw budget line (with beer on the horizontal axis). b) Calculate marginal utility of beer and marginal utility of wine [5 marks] [4 marks] 2

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