Question

Q1. Sanjana loves to read books(B) and likes to watch movies(M) as well. She derives double the satisfaction from reading a book than watching a movie. Her utility function is as follows U(B, M) = 2B + M Where B and M are the number of books and movies respectively. a. Explain the shape of the indifference curve using diagrams. [3 MARKS, Word limit: 200] b. The income available with her is INR60. And price of movie ticket is INR 10 and that of a book is INR 15. Will she spend her entire budget and why? What will be her consumption, explain why

Answer 1

$\left\{\begin{matrix} 15B+10M\leqslant 60, \\ B=2M; \end{matrix}\right.$

$\left\{\begin{matrix} M\leqslant 1.5, \\ B=3; \end{matrix}\right.$

$\left\{\begin{matrix} M= 1, \\ B=3; \end{matrix}\right.$

she will not spend her entire budget,

her consumption will be

$60-1\cdot 10-3\cdot 15=5$ INR.