Joey likes beer and whisky and spends £75 in total on drink. His utility function for whisky (w) and beer (b) is = 5 + . He can buy beer at £2 a can but the liquor store tries to discourage overconsumption of spirits by charging higher prices for larger quantities: the cost in dollars of bottles of whisky works out at !.
a. How many cans of beer and how many bottles of whisky does Joey consume?
b. Illustrate your answer with a clearly labelled diagram showing Joey's budget constraint and his indifference curve passing through the optimal consumption bundle.
c. Joey's friend Ross shops at the same liquor store and spends the same amount on drink. Jim, however, insists on drinking beer and whisky together. His utility function is = min{5, } How much beer and whisky does Jim buy?