Paul derives utility from cups of coffee (C) and donuts, which he eats a dozen at a time (D). His utility function is: U = √C.D d. Show that Paul's income will not permit him to reach the =20 indifference curve. e. If Paul buys five dozen donuts, how many cups of coffee can he buy and what is his utility? f. Use a carefully drawn graph to show that the utility calculated in part e is the highest Paul can achieve with his $200.
Paul derives utility from cups of coffee (C) and donuts, which he eats a dozen at a time (D). His utility function is: U = √C.D d. Show that Paul's income will not permit him to reach the =20 indifference curve. e. If Paul buys five dozen donuts, how many cups of coffee can he buy and what is his utility? f. Use a carefully drawn graph to show that the utility calculated in part e is the highest Paul can achieve with his $200.
Chapter7: Consumer Choice: Maximizing Utility And Behavioral Economics
Section: Chapter Questions
Problem 6QP
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- Paul derives utility from cups of coffee (C) and donuts, which he eats a dozen at a time (D). His utility function is:
U = √C.D
d. Show that Paul's income will not permit him to reach the =20 indifference curve.
e. If Paul buys five dozen donuts, how many cups of coffee can he buy and what is his utility?
f. Use a carefully drawn graph to show that the utility calculated in part e is the highest Paul can achieve with his $200.
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