Identify three bundles that provide a utility of 100

Reference no: EM13221711

Linda loves buying shoes and going out to dance. Her utility function for pairs of shoes, S, and the number of times she goes dancing per month, T, is U(S,T)=5ST. It costs Linda $50 to buy a new pair of shoes, and $25 to spend an evening dancing.

a. Identify three bundles that provide a utility of 100.

b. Assume that she has $400 to spend on clothing and dancing. Find Linda's utility maximizing bundle of S and T.

c. Assume that the price of shoes increases to $100 and her nominal income remains at $400. Find Linda's utility maximizing bundle of S and T.

d. Based on your response to (b) and (c), derive the equation for Linda's linear inverse demand curve for shoes (i.e., if we assume a linear function al form for Linda's demand function, e.g., Ps = mS + C, calculate the intercept (C) and slope (m) parameters.

Reference no: EM13221711

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