Remember in your answers include graphs whenever possible and show all your works.
1) Paula has set aside $60 monthly budget to attend plays and watch movies. She likes plays exactly three time as much as she likes movies. (Plays and movies are perfect substitutes with 1 to 3 ratio.)
a) Draw her indifference curves.
b) If plays tickets cost $12 each and movie tickets cost $6 each, show her budget line and the highest attainable indifference curve. How many plays will she see? How many movies will she see?
c) If the price of movies decreases to 4 dollars how many movies will she see?
2) Boris budgets $9 weekly for his morning coffee with milk. He likes it if it is prepared with 4 parts coffee, 1 part milk. (Milk and coffee are perfect complements here). Coffee costs $1/oz, and milk $0.5/oz. Draw his budget constraint and indifference curves and show what is his optimal consumption of coffee and milk.
3) Smith likes cashews better than almonds and likes almond better than walnuts. He likes pecans equally as macadamia nuts and prefers macadamia nuts to almonds. Assuming his preferences are transitive, which doe he prefer: (explain your answer)
a) Pecans or walnuts?
b) Macadamia nuts or cashews?