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Imam Abdulrahman Bin Faisal University College of Business Administration
Question#45 marks For this problem, assume that Ibrahim has SAR100 to spend on books and movies each month and that both goods must be purchased whole (no fractional units. Movies cost $10 each, and books cost $15 each. Ibrahim's preferences for movies and books are summarized by the following information: Books Movies No.of TU MU MU/S No.of TU MU MU/S Month 40 Month 22 22 1.47 1 50 50 5 1 30 3 2 42 20 2.33 2 80 2 3 52 10 0.67 3 100 20 110 10 1 4 57 5 4 06 5 60 3 0.2 5 116 6 5 0.5 6 62 2 0.13 6 121 7 63 1 0.07 7 123 2 0.2
movies and books.
b Given the budget of SAR100, what quantity of books and what quantity of movies will maximize Ibrahim's level of satisfaction? Explain briefly /c Draw the budget constraint (with books on the horizontal axis and identify the optimal combination of books and movies as point A. Now suppose the price of books falls to SAR5. Which of the columns in the table must be recalculated? Do the required recalculations e After the price change, how many movies and how many books will Ibrahim purchase?
noVe Than This
Bease1+4x10 60+40=100 6
(BooKs)
-mU/s)columns will be recalculated because of the change in Price 15-55
16uS
X