Assignment Task: Ms Caffeine enjoys coffee (C) and tea (T) according to the function U( T, C) = 4T + 3C.
(a) What does her utility function say about her MRS of coffee for Tea? What do her indifference curves look like?
(b) If coffee and tea cost $3 each, and MS. Caffeine has $12 to spend on these products, how much coffee and tea should she buy to maximize her utility?
(c) Draw the graph of her indifference curve and budget constraint showing the utility maximizing point. (1) How would her consumption change if the price of coffee fell to $2?