Question

the information regarding the preference and utility Consider the table below with information regarding the preferat pattern of Red Sox fan Bobby in purchasing Food and Beer while watchi game in Boston during baseball season. Beer while watching Red Sox Consumption of Food Quantity TU Consumption of Sam Adams Beer Quantity TU MU 120 | 220 300 360 400 160 320 440 490 520 4 Estimate the MU values for both Food and Beer and fill out the blanks in MU columns emand and at elasticity Sunnase Bobby has $40 to spend in buying food or beer or both and the price of heer is $4 per bottle and $5 for Food/unit. What would be the best combination of beer and food for Booby to maximize his total utility (TU)? 43. Suppose on another game day, Bobby found out that the beer price has gone up to $5 per bottle with no change in price of food. With new relative price, what will be the best combination of beer and food to maximize his TU? 4.4. Using the answers from 4.2 and 4.3, draw the corresponding demand curve for beer in a graph. You may skip the complexity of drawing the Indifference Curve and tangency point 4.5. Are beer and food close substitute goods? How do you figure it out? (Hint: Use Price Elasticity of demand concept to calculate and apply the rule). t tickets up the ingness he skier al ski

Answer 1

ans 4.1-MU OF FOOD--,120,100,80,60,40

MU OF Beer- -,160,160,120,50,30

formula:TUn-TUn-1

ans4.2: Bobby has $40 to spend in buying for food or beer or both.Price of food is $5 and Price of beer is $4.

the best combination of beer and food for bobby to maximise his total utility(TU)=P1X1+P2X2=Y

$4*5+5*4=$40

5 quantity of beer and 4 quantity of food would be give him maximum total utility.

ans4.3: when the price has gone up of beer $5 then the best combination of TU=4 QUANTITY OF BEER AND 4 QUANTITY OF FOOD CAN BE GIVE HIM MAXIMUM TOTAL UTILITY.

ANS 4.5: no beer and food is not a substitue good