For this problem, assume that Joe has $80 to spend on books and movies each month and thta both goods must be purchased whole(no fractional units). Movies costs $8 and books costs $20 each. Joe's preferences for movies and books are summarized by the following information.
b. Are these preferences consistent with the lw of diminishing marginal utility? Explain briefly.
c. Given the budget of $80, what quanity of books and what quanity of movies will maximize Joe's level of satisfaction? Explain briefly.
d. Draw the budget constraint (with books on the horizon axis)and identify the optimal combination of books and movies as point A.
e. Now suppose the price of books fall to $10. Which of the columns in the table must be recalculated? Do the required calculations.