Shania consumes music CDs and food. (Well, she doesn't literally consume the CDs, she just buys them and listens to them.) Her utility function is U(F, C) = 50?C + F, where C is the number of CDs and F is pounds of food. Her marginal utilities for CDs and food are MUF = 1 and MUC = 25/?c. Her monthly income is $M, food costs $1 per pound, and CDs cost $10 per CD. What is Shania's MRSCF? Do her preferences have the declining MRS property? What is her best choice as a function of M? Draw Shania's income-consumption curve. Draw her Engel curves for CDs and food.
This question was answered on: Jul 11, 2017
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