ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Question
Sherry loves sandwiches and lemonade. Her utility functions is U (s, l) = min{s2+
2l2, 2s2+l2}, where s is her consumption of sandwiches and l is her consumption
of cups of lemonade.
a. Draw Sherry indifference curve along which her utility is 300
b. How many sandwiches and cups of lemonade Sherry will consume if she
has $20 and price of a sandwich and a cup of lemonade are $2 and $4,
respectively.
Expert Solution
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Step 1
Utility function : U (s, l) = min{s2 +2L2 , 2s2 +L2 },
Optimal consumption point for a consumer is achieved at the point where the indifference curve and budget constraint are tangential to each other .
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