Suppose Bilbo Baggins spends all of his income on food F, an

Custom Essays Economics Suppose Bilbo Baggins spends all of his income on food F, an

Economics

Suppose Bilbo Baggins spends all of his income on food F, an

Suppose Bilbo Baggins spends all of his income on food F, and pip… Show more (U(F,W)=(2F^{1/2}+2W^{1/2})^{2}) Suppose Bilbo Baggins spends all of his income on food F, and pipe weed W, and his utility function is given above. If Bilbo%u2019s income is Y=144, the price of food is (p_{F}=$4) and the price of pipe weed is (p_{W}=$2) : a) Assuming pipe weed is plotted on the %uD835%uDC66-axis, find Bilbo%u2019s marginal rate of substitution and the marginal rate of transformation he faces. b) Assuming an interior solution exists, solve for the Bilbo%u2019s optimal bundle of food and pipe weed using just the marginal rates of substitution and transformation and Bilbo%u2019s budget constraint. • Show less

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