Each year Shakira selects the quantity of doctor visits x an

Each year, Shakira selects the quantity of doctor visits (x) and other consumption (y) that she will consume in order to maximize her utility. She spends her entire yearly income on these two goods. Suppose you are given the following information about the choices that shakira makes over a three-year period: Did Shakira\'s utility increase or decrease between year 1 and year 2? Between year 1 and year 3? Explain using a graph to support your answer.

Solution

Between year 1 and 2, Shakira\'s utility decreased (from 70% to 50%). She spent 70 out of 100 in year 1 as compared to 50 out of 100 in year 2.

Between year 1 and 3, Shakira\'s utility decreased (from 70% to 64%). She spent 70 out of 100 in year 1 as compared to 96 out of 150 in year 3.