Reference no: EM132648803

George also likes apples and bananas. Its utility function is ? (XABA B,X) = 4 (X× X). The price of an apple is € 1, a banana € 2, and its income is € 40.

a) Draw the income restriction curve in blue. Draw the indifference curve in red, which gives 600 utility units, and the indifference curve, which gives 1200 utility units, in black.

b) Can George consume any combination of goods, which gives him 600 utility units?

c) Can George consume any combination of goods, which gives him 1200 utility units?

d) In the graph show a point that George can consume and gives him a utility of more than 600 units.

e) Calculate the marginal substitution ratio and the slope of the income constraint.

f) Make an equation that shows that the indifference curve is tangent to the income constraint.

g) What is the best combination of goods that George can consume?

h) How useful is George at this point?

i) Draw the indifference curve that gives the specific level of utility.