Question 1: Assume you have a linear utility function (i.e. constant marginal utility) for food and entertainment. Your preferences are such that you value a unit of food half as highly as a unit of entertainment. Your budget is $80 and the price of a unit of food is $1 as is the price of a unit of entertainment. Given this information, answer the following questions.
Question 2: Use a graph to illustrate your utility maximizing behavior. Briefly explain this graph.
Question 3: Could your behavior be different if you had a utility function that reflected decreasing marginal utility for both food and entertainment? Explain using words and a graph.
Question 4: Assuming the original linear utility function, use a graph and words to explain what would happen to your demand for entertainment if your budget was cut in half.