Charlie is a Baylor student who cares about how many square feet
(sq. ft.) of space he has in his apartment, s, and how much he gets to
spend per month on other stuff, x. His preferences are represented by
the utility function u(s, x) = sx², and he budgets $1,200 a month for
rent and other stuff. Assume he maximizes utility subject to his
budget constraint.
1. If rent costs $1 per sq. ft., how large is Charlie's apartment?
a. 360 sq. ft.
b. 380 sq. ft.
c. 400 sq. ft.
d. 420 sq. ft.
e. 440 sq. ft.
2. If rent drops to $0.80 per sq. ft., Charlie will reoptimize by
moving to a larger apartment. Assuming his budget remains at
$1,200, how much more will Charlie spend on other stuff
relative to the situation from the previous problem?
a. $50 more
b. neither more nor less
c. $50 less
d. $100 less
e. $150 less
