I have a perplexing practice problem:
A consumer can spend all her money on books (x) or films (z).
Her budget constraint is given as 10x + 20z =200
and utility is
What happens if her money is increased to 250? Why? What does that mean?
From what I can tell, the current optimization (taken by setting the constraint as x=20-2z and plugging it into the utility function, taking the derivative, and setting it equal to zero) is x= 13.34 and z= 3.33
If the budget increases by 50, the consumption will increase too, but what calculation should I use? And what will I be looking at? The marginal rate? I don't understand what I can calculate to show change as the budget increases.