Stringer Bell sells two products, red candy for $4 and yellow candy for $5. In a typical hour, 5 customers will buy only red candy and 4 customers buy only yellow candy, but there are 2 people who buy both. After asking around, Stringer Bell learns that the red-candy buyers would also buy yellow candy if it were to cost $2, and yellow-candy buyers would also buy red candy if they were sold for $2. Stringer Bell considers selling red and yellow candy together in a bundle, in addition to selling them separately at the original prices. What is the optimal price of the bundle

3. saving two consumers, larry and jeff, have utility functions defined over the two periods of their lives: middle age (period zero) and retirement (period 1). they have the same income in period 0 of m dollars and they will not earn income in period 1. the interest rate they face is r. larry’s and jeff’s utility functions are as follow. = 0.5 + 0.5 and = 0.5 + 0.5 for each person is between zero and one and represents each consumer’s temporal discount econ 340: intermediate microeconomics. ben van kammen: purdue university. rate. a. write the budget constraint that applies to both jeff and larry in terms of consumption in each period and ), interest rate, and m. b. what is larry’s and what is jeff’s marginal rate of intertemporal substitution? c. what is the slope of the budget constraint? d. write each consumer’s condition for lifetime utility maximization. e. re-arrange the conditions from part (d) to solve for the ratio, . f. if > which consumer will save more of his middle age income? g. if > 1 1+ , in which period will larry consume more: = 0 or = 1?