Suppose that Bridget and Erin spend their incomes on two goods, food (F) and clothing (C). Bridgetâs preferences are represented by the utility function U(F, C)=10FC, while Erinâs preferences are represented by the utility function U(F, C) = 20 * F . Food price is $10 per 2 * C 2 unit and Clothing price is $15 per unit. Income is $1000 for both of them.
Required:
a. Find optimal choices of food and clothing for Erin and Bridget. No need to draw a curve.
b. From optimal choice, imagine Erin and Bridget have to decrease consumption of clothing. Who would be more upset? In other words, who would be giving up more in terms of utility? Remember, income is still constant.
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Suppose that Bridget and Erin spend their incomes on two goods, food (F) and clothing (C). Bridgetâs...
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