Question 1 9 Marks Ashwin likes to spend her spare time in .pdf

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Ashwin has 48 hours of spare time per month and $324 to spend on entertainment, which can be spent watching cricket for 8 hours at $45 per game or movies for 4 hours at $36 each. Ashwin's budget and time constraints are drawn on a graph. Sam has the same constraints but a utility function of U(x,y)=x+y, maximizing at (8 games, 0 movies). Ashwin's utility function is V(x,y)=min(x,y), maximizing at (4 games, 4 movies). With a new $144 season cricket ticket, Ashwin can watch unlimited games, changing his budget constraint. Sam is unaffected but Ashwin is better off with more options

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Question 1: 9 Marks Ashwin likes to spend her spare time in summer in one of two ways: (i)
watching cricket ( x ) at Sydney Cricket Ground or (ii) watching movies (y) at Ritz cinema. In
choosing how to entertain herself, she considers both constraints---money and time. Part I (3
marks) Ashwin has 48 hours of spare time in a month. A cricket game runs for 8 hours, while each
visit to the movies takes up 4 hours. Each month, Ashwin also has $324 to spend on
entertainment. A ticket for a cricket game costs $45. A visit to the movie costs $36. (a) (1 mark)
Write down Ashwin's budget constraint and time constraint. (b) (2 marks) Perhaps "Draw Ashwin's
budget constraint and time constraint in a clearly labelled diagram. Label all axis intercepts in the
two axes (x and y ) and the point of intersection of the two budget lines. Shade the set of bundles
that Ashwin can afford (those satisfying both his time and money constraints) with vertical lines."
Part II (3 marks) Sam---a friend of Ashwin---has the same amount of spare time (48 hours per
month) and same amount of money to spend on entertainment ($324 per month). He faces the
same constraints as Ashwin. However, Ashwin and Sam have slightly different preferences over
cricket (x) and movies (y). - Sam's utility function: U(x,y)=x+y - Ashwin's utility function: V(x,x)=min
{x,y} Each maximizes their own utility. a) What is/are the utility maximizing bundle/s for Sam? b)
What is/are the utility maximizing bundles for Ashwin? Part III (3 marks) To attract cricket fans
back after Covid as well as to cover revenue shortfall, the local cricket association has decided to
offer a season ticket for $144. Tickets are now NO LONGER sold separately for each game (i.e.,
the season ticket is the only option if one wants to watch cricket at SCG). With the season ticket
Ashwin can watch as many cricket games as he wants. (c) (1 mark) Draw Ashwin's new budget
constraint for money, and shade in his new affordable set of bundles with horizontal lines. I (d) (2
marks) Is Sam better off or worse off with the introduction of season ticket? What about Ashwin?

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