Joaquin Consumes Pizza and Beer

question 54

Essay

Joaquin consumes pizza and beer. His utility function is where P is the number of pizzas and B is glasses of beer. Joaquin has $30, and he plans to spend all of it on pizza and beer today.
a. The price of one pizza is $10 and the price of beer is $3 per glass. Solve for Joaquin's optimal bundle.
b. Suppose that during happy hour Joaquin can get beer for $2. Find the substitution effect, the income effect, and the total effect of the decrease in the price.
c. Are pizza and beer normal or inferior goods for Joaquin? Explain.

---

Definitions:

Weak Situation

A type of environmental context where norms, expectations, and roles are vague or ambiguous, leading to greater variability in individuals' behaviors.

Situationism

A theory within psychology that suggests human behavior is largely determined by the surrounding context or situation rather than by personal characteristics or traits.

Unstructured Conversation

A type of dialogue that does not follow a predetermined format or topic, allowing for free-flowing and spontaneous communication.

Dependable

Capable of being relied upon; showing reliability and consistency in actions and behavior.