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Jack, our representative consumer, consumes varying amounts of beef and rice. Assume that B = quantity...

Jack, our representative consumer, consumes varying amounts of beef and
rice. Assume that B = quantity of beef consumed, and that R = quantity of rice
consumed. Jack’s utility function is given as: U(B,R) = √(B*R)

a. (5) Assume further that the price of beef is $4, the price of rice is $2, and that
Jack’s income is $200. How much of each product should he purchase?
b. (5) How are the quantities calculated in (a) above affected when the price of
rice increases from $2 to $4? Calculate the substitution and income effects for
rice?
c. (2.5) Is rice a normal good or an inferior good? Explain.

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