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Show the consumer budget constraint, indifference curves and optimal consumption choice for wine and cheese if the price of wine is $3 per glass, the price of cheese is $6 per pound and when income of the person is $3000. What is the marginal rate of substitution at this optimum point? 

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Vaishnavi Kanukurti
Vaishnavi KanukurtiLv10
1 Nov 2020

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Related questions

The price of cheese rises from $6 to $10 per pound while the price of wine remains $3 per glass. For a consumer with a constant income of $3,000, show what happens to the consumption of wine and cheese. Decompose the change into income and substitution effects.

Bridget has a limited income and consumes only wine and cheese. Her current consumption choice is four bottles of wine and 10 pounds of cheese. The price of wine is $10 per bottle and the price of cheese is $4 per pound. The last bottle of wine added 50 units to Bridget's utility, while the last pound of cheese added 40 units.

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Mr. Robert has a limited income and consumes only wine and cheese; his current consumption choice is four bottles of wine and 10 pounds of cheese. The price of wine is $10 per bottle, and the price of cheese is $4 per pound. The last bottle of wine added 50 units to Robert’s utility, while the last pound of cheese added 40 units. -

1. Is Mr. Robert making the utility –maximizing choice? Why or Why not?

2. If not, what should he do instead? Why?

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