Problem
Gladys loves books and spends her money only on mysteries and science fiction novels and has a budget of $60 to spend on these two types of books. She is always willing to trade 2 mystery novels for 1 science fiction novel. Suppose Barnes & Noble sells mystery novels for $10 each and science fiction novels for $15 each. Let x1 be the number of mystery novels purchased and x2 be the number of science fiction novels purchased by Gladys. Let p1 be the price of a mystery novel and p2 be the price of a science fiction novel.
a) Draw 2 indifference curves which represent Glady's preferences
b) Graph Glady's budget line. How many mystery novels and how many science fiction novels would Gladys purchase in this situation?
c) What is Gladys demand function for mystery novels?
d) Based on your answer in part (c), draw Gladys demand curve for mystery novels in the graph below, assuming the science fiction novels are $15 each and her budget is $60.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.