Optimal consumption of coffee and milk

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1. 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.

2. 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?

Reference no: EM13860248

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