As before, the price of a movie is $3 and the price of a book is $5. Ann has an income of $20, which she spends on movies and books. Suppose her utility function is given by UB,M = min{5B, 2M}.
Now her parents promise to give her $2 per book that she buys, up to a total amount of at most $10. How many movies can Ann afford if she buys only movies? How many movies can she afford if she buys 5 books? How many books can she afford if she buys only books?
b. Compute Ann's optimal consumption bundle.