Alex’s preferences can be represented by the utility function U(xn, xb) = 4√xn + xb.
• He originally consumed 9 units of nuts and 10 units of berries. His consumption of nuts is reduced to 4 units, but he is given enough berries so that he is just as well-off as he was before. After the change, how many units of berries does Alex consume?
• If you doubled the amount of each good in each bundle, you would have bundles?
• Are these two bundles on the same indifference curve? What is Alex’s marginal rate of substitution, MRS(xn, xb), when he is consuming the bundle (9, 10)? (Give a numerical answer.)
• Imagine the price of nuts pn = 1, and pb = 2. What is his budget if he can afford the bundle (9, 10)? Can he afford the new bundle?