1.

a. If the person buys only apples, they can buy 8.00 / 0.40 = 20 apples.
b. If the person buys only bananas, they can buy 8.00 / 0.10 = 80 bananas.
c. If the person buys 10 apples, they would spend 10 * 0.40 = 4.00 on apples. They
would have 8.00 - 4.00 = 4.00 left to spend on bananas. Therefore, they can buy 4.00
/ 0.10 = 40 bananas with the funds left over.
d. If the person consumes one less apple (9 apples), they would spend 9 * 0.40 =
3.60 on apples. They would have 8.00 - 3.60 = 4.40 left to spend on bananas.
Therefore, they can buy 4.40 / 0.10 = 44 bananas with the funds left over.
The rate of trade-off is not the same no matter how many apples are relinquished.
As the person buys fewer apples, they have more funds left over to buy bananas,
resulting in a higher quantity of bananas purchased..
E, can be bought. 8.00= $.40 x number of apples + $.10 x number of bananas =
40A+100 x 0
Budget constraint

2.

a)Utility will be equal to 20 (Utility =√ 5∗80=√ 400=20 ¿

b) B must be equal to 40 (20 =√ 10∗b → 400=10 b → b=40
c) B must be equal to 20 (20 =√ 20∗b → 400=20 b → b=20 ¿

d)
 indifereence curve

Utility maximization

f)
3)
a. The graphical argument to show that the dual approach will yield the same choices as the utility-
maximization approach is as follows:

1. Start with the budget constraint line and indifference curves representing different levels of
utility.
2. The utility-maximization approach aims to find the highest utility level within the budget
constraint line, which is the point where the budget constraint is tangent to an indifference curve.
3. The dual approach aims to achieve a given target level of utility at minimal cost. This can be
represented by drawing a line parallel to the budget constraint line, intersecting the highest
attainable indifference curve for the target utility level.
4. The point of intersection between the parallel line and the highest attainable indifference curve
represents the bundle of goods that achieves the target utility level at minimal cost.
5. By comparing the point of tangency from the utility-maximization approach and the point of
intersection from the dual approach, we can see that they yield the same bundle of goods.

b. To calculate the costs of attaining the utility target of U = 10 for the given bundles of goods:

i. C = 100, D = 1:
Cost = (100 * $5) + (1 * $20) = $500 + $20 = $520

ii. C = 50, D = 2:
Cost = (50 * $5) + (2 * $20) = $250 + $40 = $290

iii. C = 25, D = 4:
Cost = (25 * $5) + (4 * $20) = $125 + $80 = $205

iv. C = 20, D = 5:
Cost = (20 * $5) + (5 * $20) = $100 + $100 = $200

v. C = 10, D = 10:
Cost = (10 * $5) + (10 * $20) = $50 + $200 = $250

vi. C = 5, D = 20:
Cost = (5 * $5) + (20 * $20) = $25 + $400 = $425
5)

c. The bundle in part b with the least cost of reaching the U = 10 target is C = 20, D = 5, which costs
$200. This is the same bundle as the utility-maximizing solution found in problem 3.
4)
a. Ms. Caffeine's MRS of coffee for tea is 3:4. Her indifference curves will look like straight lines
that have a slope of 3/4 and intercepts at 3C + 4T = 0.
b. To maximize her utility, Ms. Caffeine should buy 8 units of tea, as 8 * 4 = 32, and she has 12
units to spend, so she should not buy any coffee.
c. The graph of Ms. Caffeine's indifference curve map and budget constraint will show that the
utility-maximizing point is on the T-axis, where no coffee is bought.
d. Yes, if Ms. Caffeine had more money to spend, she would buy some coffee.
 e. If the price of coffee fell to $2, Ms. Caffeine would buy more coffee and less tea to maximize her
utility.

6)
To solve this problem, we need to consider the cost of the food items and the ratio in which they are
consumed.
Given:
 The cost of peanut butter is $4 per pound
 The cost of carrots is $2 per pound
 The ratio of peanut butter to carrots is 2:1
This means for every 2 pounds of peanut butter, Vera consumes 1 pound of carrots.
Let's calculate the total cost for this ratio:
 Cost of 2 pounds of peanut butter = 2 * $4 = $8
 Cost of 1 pound of carrots = 1 * $2 = $2
So, the total cost for the 2:1 ratio of peanut butter to carrots is $8 + $2 = $10.
Now, given that Vera has $100 to spend on food per month, we can calculate how many times she
can afford this ratio:
 Number of times she can afford the ratio = Total budget / Cost of the ratio = $100 / $10 = 10 times
Therefore, Vera can afford to eat the 2:1 ratio of peanut butter to carrots 10 times in a month.
This means she can consume:
 10 * 2 pounds of peanut butter = 20 pounds of peanut butter
 10 * 1 pound of carrots = 10 pounds of carrots
So, Vera can eat 20 pounds of peanut butter and 10 pounds of carrots in a month.

8)
A low-income person’s budget constraint in the absence of an
income transfer program is

where PF is the price of food relative to non-food items and NF

and I are measured in terms of non-food prices (that is, dollars).
(Check the graph in attachment)
The consumer spends NF₁ amount on non-food
consumption and consumes F₁ units of food items.
9)
The graph below shows the consumer’s allocation of his income between two goods- housing
(H) and all other consumption goods (C). At utility level of , the consumer consumes units of
housing and units of all other consumption goods
10) idk