Reference no: EM132505313

Amy loves fancy and fashionable outfits. She never wears an outfit twice. She has a utility function takes the form U(x,y) = x1/2y1/2 = √xy, where x stands for the number of "new outfits" and y is the amount of "Other goods" essential to her living. That is to say, Amy's marginal utilities for new outfit and other goods are respectively.

Amy recently noticed that one of her favourite brand "Supreme" is offering a deal on its' latest patchwork hooded jackets, which is sold at $100 a piece. The promotion claims that one can "get the second piece 50% off." It means, if Amy buys a jacket from Supreme for $100, she can buy the second jacket (of different colour) for 50% of the original tag price, $50. In addition, if Amy wants a third jacket, she has to pay $100 again, but now she has the privilege to purchase the fourth jacket for $50, etc. Assume the price for "Other goods" is $50 and Amy has a monthly income of $1,000 to spend on both the Supreme jackets and "Other goods." Answer the following questions. Note that, if your final results are not integers, report the results up to two decimal digits.

Draw Amy'sbudget constraint on another graph with necessary details, with"Supreme jackets" on the horizontal axis. (Hint: this graph needs to be reasonably accurate.)