What kind of goods are chocolate sauce and puffs

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Reference no: EM131095484

Emilie loves profiteroles. She makes a profiterole by combining one unit of chocolate sauce (say 8 fl oz) and two puffs (stuffed with paste). She receives one unit of utility per profiterole. Bertrand just likes to eat. He receives one unit of utility per puff or per unit of chocolate sauce. Bertrand and Emilie are on a diet that assigns points to food: pp is the number of points for a puff, and pc is the number of points for a unit of chocolate sauce. They would simply like to maintain their current weight, so the diet rules are as follows: They can consume any combination of chocolate sauce and puffs as long as the total number of points is less than (or equal to) the point-value of their endowment

(1) Let xic ∈ R+ be the amount of chocolate sauce and xip ∈ R+ be the quantity of puffs consumed by consumer i (i is Emilie or Bertrand). Write down both agents’ utility functions. (Note: Suppose any amount of profiteroles in R+ is possible.)

(2) What kind of goods are chocolate sauce and puffs for Bertrand? Show his indifference curves on a graph. What kind of goods are chocolate sauce and puffs for Emilie? Show her indifference curves on a graph.

Reference no: EM131095484

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