1)SupposeJakehas$90,whichhespendsonlargefriesandketchup.Priceoflargefriesis$3andpriceofapacketofketchupis$1.Jakealsohasacouponentitlinghimto20freelargefries.ForJake,Ketchupandfriesarecomplements.Indeedheonlyenjoyshislargefriesifhehas2packetsofketchupwithit.DrawJake’sbudgetset.DrawafewofhisICsrepresentinghispreferences.FindJake’soptimalbundle,labelitAonyourgraphandwriteitbelow.DrawtheICthatpassesthroughhisoptimalbundle.A=(K,F)
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2)SupposeJakehas$150,whichhespendsonlargefriesandketchup.Priceoflargefriesis$3andpriceofapacketofketchupis$1upto30packsandthentherestaurantcharges$6perpackinexcessof30packsofketchup.ForJake,Ketchupandfriesarecomplements.Indeedheonlyenjoyshislargefriesifhehas2packetsofketchupwithit.DrawJake’sbudgetset.DrawafewofhisICsrepresentinghispreferences.FindJake’soptimalbundle,labelitBonyourgraphandwriteitbelow.DrawtheICthatpassesthroughhisoptimalbundle.B=(K,F)
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3)SupposeJakehas$100,whichhespendsonlargefriesandketchup.Priceoflargefriesis$2andpriceofapacketofketchupis$1.Therestauranthasaquantitylimitof60packsofketchupperperson.ForJake,Ketchupandfriesarecomplements.Indeedheonlyenjoyshislargefriesifhehas2packetsofketchupwithit.DrawJake’sbudgetset.DrawafewofhisICsrepresentinghispreferences.FindJake’soptimalbundle,labelitBonyourgraphandwriteitbelow.DrawtheICthatpassesthroughhisoptimalbundle.C=(K,F)
HowwouldJakerankthethreebundlesA,BandC)youmarked?
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4)EmilylikeswatchingmoviesonweekendsfromAmazonprime.Shelikeswatchingnewreleasesaswellasoldmovies.NewreleasesandoldmoviesareperfectsubstitutesforEmily.Infacthermarginalrateofsubstitutionisconstantandequalto2.Inotherwordsshelikesonenewreleaseequallywellas2oldmovies.SupposeAmazonprimecharges$1foroldmoviesand$5forthenewreleasesupto2moviesandthencharges$2pernewreleaseinexcessof2.AssumeEmilyhas$20ofbudgettospendonmovies.DrawEmily’sbudgetset.DrawafewofherICsrepresentingherpreferences.FindEmily’soptimalbundle,labelitAonyourgraphandwriteitbelow.DrawtheICthatpassesthroughheroptimalbundle.A=(N,O)
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5)Allisonenjoysexercisingandderivesthesamesatisfactionfrom3yogaclassesasshedoesfrom1kickboxingclass.ForAllisonyogaandkickboxingclassesareperfectsubstitutes.Thelocalexercisestudiocharges$10foreachkickboxingclassandcharges$10forthefirst10yogaclassesandthen$5foreachyogaclasstakenbeyond10.Allisonhas$160tospendonexercising.DrawAllison’sbudgetset.DrawafewofherICsrepresentingherpreferences.FindAllison’soptimalbundle,labelitAonyourgraphandwriteitbelow.DrawtheICthatpassesthroughheroptimalbundle.A=(Y,K)
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6)Ryanhasabudgetof$160forentertainment,whichhespendsonYoga(Y)andKickboxing(K)classes.ForRyan,YogaandKickboxingareperfectcomplements.Specifically,helikestotakeoneYogaclassforeveryoneKickboxingclasshetakes,tostretchandrealignhisbody.Thelocalexercisestudiocharges$10foreachkickboxingclassandcharges$10forthefirst10yogaclassesandthen$5foreachyogaclasstakenbeyond10.DrawRyan’sbudgetset.DrawafewofhisICsrepresentinghispreferences.FindRyan’soptimalbundle,labelitAonyourgraphandwriteitbelow.DrawtheICthatpassesthroughhisoptimalbundle.A=(Y,K)
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7)JarodlikestoattendBlueJackethockeygamesandCrewsoccergames.ForJarrodBlueJacketHockeyTickets(H)andColumbusCrewsoccertickets(S)areperfectsubstituteswhereJarrod’smarginalrateofsubstitutionisconstantandequalto4.Jarrodhas$300tospendonthesetwoevents.Hockeyticketsare$50andsoccerticketsare$30.DrawJarrod’sbudgetset.DrawafewofhisICsrepresentinghispreferences.FindJarrod’soptimalbundle,labelitAonyourgraphandwriteitbelow.DrawtheICthatpassesthroughhisoptimalbundle.A=(S,H)
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8)a)ForSvitlanaCallawaygolfballsandBridestonegolfballsareperfectsubstitutes.Hermarginalrateofsubstitutionisconstantandequalto3.Callaway(C)golfballscost$8eachwhereasBridestone(B)golfballscost$30each.Svitlanahas$240tospendongolfballs.DrawSvitlana’sbudgetset.DrawafewofherICsrepresentingherpreferences.FindSvitlana’soptimalbundle,labelitAonyourgraphandwriteitbelow.DrawtheICthatpassesthroughheroptimalbundle.A=(B,C)
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b)SupposeSvitlanareceivesagiftcertificateworth$80tobespentonCallawaygolfballs.DrawSvitlana’sbudgetset.DrawafewofherICsrepresentingherpreferences.FindSvitlana’soptimalbundle,labelitAonyourgraphandwriteitbelow.DrawtheICthatpassesthroughheroptimalbundle.A=(B,C)
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