Need help with this, Im lost. Correct answers are shown, all I need is how to wo
ID: 1143114 • Letter: N
Question
Need help with this, Im lost. Correct answers are shown, all I need is how to work through this problem. Please show work
Vasco likes spare ribs, R, and fried chicken, C. His utility function is UC, R) 10R-c. His weekly income is $90, which he spends on only ribs and chicken If he spends $10.00 for a slab of ribs and $5.00 for a chicken, what is his optimal consumption bundle? Vasco's optimal value of ribs is R 6 units. (Enter a numeric response using a real number rounded to nwo decimal places) 214a His optimal value of chicken is C 6 units. Suppose the price of chicken increases to $20.00. How does his optimal consumption of chicken and ribs change? Vasco's optimal value of ribs is 10 14 R 6 units Chicken His optimal value ot chicken is c 1.5 In the figure to the right. 1.) Using the line drawng tool, draw Vasco's initial budget constraint and label it L1 2.) Using the line drawing tool, draw his new budget constraint and label it L2 3) Using the point drawing tool, indicate Vasco's initial optimal consumption bundle and label it e1 4.) Using the point drawing tool, indicate his new optimal consumption bundle and label it e2 Carefuny follow the instructions above, and only draw the required objectsExplanation / Answer
In the first place the utility function is U(R,C)= 10R^2C
Income initially said to be=90 of which 10 is spent for a rib (Pr=10) and 5 for a chicken (Pc=5).
If the quantity of rib=6, then cost of ribs=10x6= 60
Now the quantity of chickens would be=(90-60)/5= 6 units
Similarly when the price of chicken is increased to 20, hence with the basic law of demand, the chicken demand would be lesser. Considering same number of ribs i.e. 6 with a total price of 60, the chicken quantity would be=(90-60)/20= 1.5
If the quantities are to be tested from the graph, it is easy to identify.
Where the utility function crosses the demand function, the quantities can be obtained. Let us assume the first function I2160 where it crossed the demand line @(6,6) resulting in a utility value of =10x6^2x6=2160
Same is applicable for other values of chickens and ribs.