Nicholas lives in a dormitory that offers soft drinks (X) and chips (Y) for sale in vending machines. His utility function is U(X,Y) = XY. Soft drinks cost $1 and chips cost 50¢.
A. Determine Nicholas’s optimal mix of soft drinks and chips (i.e., how many soft drinks should he consume relative to chips, or vice versa).
B. If Nicholas has $10 per week to spend on soft drinks and chips, how much of each should he purchase?
C. Illustrate the optimal consumption bundle found in Part B using the consumer choice problem diagram.