Terry has $100 to spend on Lake Perch and walleye for his family’s Friday fish fry. Terry’s utility function is
U(P,W) = 10W + PW
where P is pounds of lake perch and W is pounds of walleye.
a. Suppose the price of perch is $5 per pound and the price of walleye is $3 per pound. Find Terry’s optimal combination of perch and walleye.
b. Suppose that the price of perch increases to $12 per pound, while the price of walleye remains unchanged. Find Terry’s optimal combination of perch and walleye.