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Section B: Consumption B1. Malachi only consumes 2 goods: DVD downloads (D) and coffee (K). His utility function is U =
Posted: Mon May 02, 2022 8:33 am
by answerhappygod
- Section B Consumption B1 Malachi Only Consumes 2 Goods Dvd Downloads D And Coffee K His Utility Function Is U 1 (36.13 KiB) Viewed 34 times
Section B: Consumption B1. Malachi only consumes 2 goods: DVD downloads (D) and coffee (K). His utility function is U = Dº Skº 25 where D is the number of downloads and Kis cups of coffee. Malachi has $16 in his pocket right now, and he plans to spend it all on D and K today. (a) The price of one download is $4 and the price of coffee is $2 per cup. Solve for Malachi's optimal bundle. (3) (b) Suppose that Malachi joins a DVD club and download price falls to $2 while his income remains unchanged. Find the total price effect, i.e. the change in his demand, as well as its breakdown into substitution and income effects. (5) (c) Are D and K normal or inferior? (2)