Suppose coffee and cream are perfect,two-for-one complements and Jack spends his budget of $12 per day on these two goods.That is,assume that Jack likes one ounce of cream for every two ounces of coffee.The price of cream is $2 per ounce.The price of coffee is also $2 per ounce.(It's a fancy coffee shop. )
a)Graph Jack's budget line and at least two of his indifference curves.
Label the lines appropriately and identify the values of the intercepts.
b)What is Jack's optimal consumption choice? That is,how many ounces of coffee and cream would maximize his utility?
c)What will be the income and substitution effects of an increase in the price of cream to $4 per ounce?
d)Find Jack's demand curve for cream.Assume the price of coffee is still $2 and income is $12.

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The Answer of Suppose coffee and cream are perfect,two-for-one complements and Jack spends his budget of $12 per day on these two goods.That is,assume that Jack likes one ounce of cream for every two ounces of coffee.The price of cream is $2 per ounce.The price of coffee is also $2 per ounce.(It's a fancy coffee shop. )
a)Graph Jack's budget line and at least two of his indifference curves.
Label the lines appropriately and identify the values of the intercepts.
b)What is Jack's optimal consumption choice? That is,how many ounces of coffee and cream would maximize his utility?
c)What will be the income and substitution effects of an increase in the price of cream to $4 per ounce?
d)Find Jack's demand curve for cream.Assume the price of coffee is still $2 and income is $12.

Suppose Coffee and Cream Are Perfect,two-For-One Complements and Jack Spends