Describe is the mrsfc diminishing

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Reference no: EM13182742

Julie consumes food (F) and clothing (C) with a utility function of U(F,C) = FC. PF= 1 and PC=2. Julie has a total of $12 to spend on food and clothing.

For all graphs, put food on the x-axis and clothing on the y-axis.

a) What is Julie's marginal utility for food (MUF) and marginal utility for clothing (MUC)?

b) Draw indifference curves for U=12, U=18 and U=24 (just plot some rough points)

c) Is the MRSFC diminishing? Explain.

d) Solve for the optimal consumption bundle and show on the graph from part b. (You need to draw the budget line on the graph and show the point of tangency. Also solve algebraically).

e) What is the MRSFC at the optimal consumption bundle?

f) Suppose Julie was consuming clothing = 4 and food = 4. Use the equi-marginal principle to explain how she should change her consumption to maximize utility.

Reference no: EM13182742

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