Question

:Julie has preferences for food, F, and clothing, C, are derived by a utility function

U(F,C)=FC. Food costs $1 a unit and clothing costs $2 a unit. Julie has $12 to spend on

food and clothing.

.

a. Give the equation for Julie’s budget line. If food is on the vertical axis, what is the

slope of the budget line?

b. Graph Julie’s budget line. Place food on the vertical axis and clothing on the

horizontal axis.

Answer 1

a)

Budget equation is: $F+2C=12$

Slope is  $\frac{-P_{c}}{P_{f}}=-2$

b)