Cortana loves Swedish pickled herring. Her utility function…
Cortana loves Swedish pickled herring. Her utility function is U=HX2, where H is the units of Swedish pickled herring she consumes in one month, and X is her expenditure on other goods in one month. The price of herring is $2 per unit. Her weekly income is $60. a. The budget constraint for Cortana is: 2H + X= 60 b. Cortana’s optimal bundle should be: X*=, H*=) (please round to integer, please don’t use a comma, i.e input 1000 instead of 1,000). (Hint: H is the units of herring she consumes) Cortana’s utility will be . (please round to integer, please don’t use a comma, i.e input 1000 instead of 1,000) c. The government decides to support the local fishing industry and offers Cortana $60 coupon which can be only used to purchase pickled herring. How many units of herring should Cortana purchase with the new policy? : (). d. If the government offers Cortana $60 in cash, which she can use to purchase anything, her utility will increase by compared to the scenario where the government only provides a $60 coupon.