Reference no: EM133102924

Mr. Takeshi works for a Japanese company in Hanoi. For dinner, he likes to eat sushi and ebi tempura. Based on his past consumption behaviour, his utility function for these two types of food is estimated as =2 0.8 0.2 where and denote his weekly consumption of sushi and ebi tempura respectively. The average unit prices of these dishes are $px for and $py for respectively, and Takeshi spends $k per week on sushi and ebi tempura.

a) Draw the indifference curve of Mr. Takeshi for the consumption of two goods for a utility level of 4. Interpret and explain the graph.

b) For the given utility function, determine whether the marginal utility of sushi and the marginal utility of ebi tempura are increasing or decreasing. Explain briefly your answer.

c) Mr. Takeshi is a utility maximizer. Calculate the fraction of his income that he will spend on tempura and the fraction of income that he will spend on sushi.

d) Interpret your findings of part c.