Suppose a caffeine-deprived man needs to wake up. Suppose his preferences on a day can be described by U=3*coffee+2*tea. If the price of coffee is $4 and the price of tea is $1. He has $12 to spend on these drinks on a day.
A. Find his utility for the following consumption combinations:
3 coffee, 0 tea.
1 coffee, 3 tea.
2 coffee, 1.5 tea.
0 coffee, 4.5 tea.
0 coffee, 12 tea.
4 coffee, 6 tea.
8 coffee, 0 tea.
B. Show his budget constraint, indifference curves, and optimal consumption choice in a graph. Use the horizontal axis for coffee and vertical axis for tea.
C. How many cups of coffee does he drink? How many cups of tea? What is his utility?