At point (4,3) what combination of Pepsi and pizza gives Sharon the most satisfaction?
At point (4,3) what combination of Pepsi and pizza gives Sharon the most satisfaction? Based on the budget constraint BC1, if Sharon's income is $25, what is the price of a slice of pizza and a can of Pepsi? With the budget constraint BC1, Sharon can increase his consumption of Pepsi by two cans (4 to 6) if he reduces his pizza by one slice (3 to 2). What is his marginal rate of substitution between Pepsi and pizza? Now assume his new budget line is BC3. What has changed from BC1 with the prices of Pepsi and/or pizza, and the new equilibrium? What combination of pizza and Pepsi optimizes Sharon's utility? Explain the possible specific reasons for the budget constraint shifting from BC1 to BC2.
Content
At point (4,3) what combination of Pepsi and pizza gives Sharon the most satisfaction?
Based on the budget constraint BC1, if Sharon's income is $25, what is the price of a slice of pizza and a can of Pepsi?
With the budget constraint BC1, Sharon can increase his consumption of Pepsi by two cans (4 to 6) if he reduces his pizza by one slice (3 to 2). What is his marginal rate of substitution between Pepsi and pizza?
Now assume his new budget line is BC3. What has changed from BC1 with the prices of Pepsi and/or pizza, and the new equilibrium? What combination of pizza and Pepsi optimizes Sharon's utility?
Explain the possible specific reasons for the budget constraint shifting from BC1 to BC2.
