Avi always consumes 1 glass of milk with 2 cookies. He does not get utility from 1 glass of milk without 2 cookies; and do not gets utility from 2 cookies if he does not have 1 glass of milk with it. (i) What is a utility function that represents Avi's preferences. And draw a diagram showing two or three of Avi's indifference curves. (ii) If the price of a glass of milk is $4 and the price of a cookie is $2 and if Avi is has an income of $32, how many units of milk and how many units of cookies is he consuming? (iii) Assume that the prices of milk and cookies are is $4 and $2, as in (ii). We don't know Avi's income but know that he has chosen to consume 5 glasses of milk. If Avi is rational, how many cookies did he buy? And what must his income have been?

Q&A Education