Suppose that you want to derive and draw the demand function for Mr. Seong (also known asPlayer 456). Mr. Seong likes to eat Dalgona Candy (D) and drink Soju (S). Suppose Mr. Seong'spreferences can be expressed as U(D,S) = (D)º.² · (S)0.8. Suppose further the price of aDalgona Candy is 2 (pº = 2) and the price of Soju is 4 (ps = 4). Mr. Seong has a budget of 100to spend on the two goods.A. Use the substitution method to find Mr. Seong's optimal choice of Dalgona Candy and Soju.B. Use any method to find Mr. Seong's optimal choice of Dalgona Candy and Soju if the priceof Soju was 5 (instead of 4). Feel free to use the Cobb-Douglas short-cut method if youwant.C. Use your answers to A and B to derive the demand for Soju in the two diagrams below. Thatis, draw the change in the top diagram and then use your result to derive the demand curvein the bottom diagram. Several hints have been drawn in the diagram below.D5010ps54202025SFYI: The Cobb-Douglas short-cut can be expressed as:X = apxYThat is, the demand for good X is a function of thepreference parameter (a), income, and the price of X.SFYI: To draw a demand curve we need tohold all factors that affect demand constant(such as income, preferences, and prices ofrelated goods). Then we change the price ofthe particular good (like Soju) and see howthe quantity demanded (of Soju) changes.Then plot the two (price, quantity)-combinations.There is a relationship between a diagramthat shows the constrained optimizationproblem (top diagram) and the demandcurve (bottom diagram)

Utility function of Seong : U(D, S) = D0.2S0.8Price of D( Pd)= 2 Price of S (Ps) =4 Income =…

Suppose that you want to derive and draw the demand function for Mr. Seong (also known as Player 456). Mr. Seong likes to eat Dalgona Candy (D) and drink Soju (S). Suppose Mr. Seong's preferences can be expressed as U (D, S) = (D)⁰.2. (S)0.8. Suppose further the price of a Dalgona Candy is 2 (p = 2) and the price of Soju is 4 (pS = 4). Mr. Seong has a budget of 100 to spend on the two goods. A. Use the substitution method to find Mr. Seong's optimal choice of Dalgona Candy and Soju. B. Use any method to find Mr. Seong's optimal choice of Dalgona Candy and Soju if the price

Suppose that you want to derive and draw the demand function for Mr. Seong (also known as Player 456). Mr. Seong likes to eat Dalgona Candy (D) and drink Soju (S). Suppose Mr. Seong's preferences can be expressed as U (D, S) = (D)⁰.2. (S)0.8. Suppose further the price of a Dalgona Candy is 2 (p = 2) and the price of Soju is 4 (pS = 4). Mr. Seong has a budget of 100 to spend on the two goods. A. Use the substitution method to find Mr. Seong's optimal choice of Dalgona Candy and Soju. B. Use any method to find Mr. Seong's optimal choice of Dalgona Candy and Soju if the price

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter4: Utility Maximization And Choice

Section: Chapter Questions

Problem 4.13P

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