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Julia likes to consume two brands of jeans: jeans from the Gap (G) and jeans from J

Economics

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Julia likes to consume two brands of jeans: jeans from the Gap (G) and jeans from J. Crew (J). She considers these goods to be substitutes and her utility function is: U(G, J) = G+4J Julia's birthday is this weekend and her (very generous) parents have given her $3, 000 to spend on jeans at the mall. In addition, Julia's (very generous) Aunt Sally has sent her a birthday card with a gift certificate to the Gap worth $600. The price of jeans at the Gap is $30 and the price of jeans at J. Crew is $60. (a) What is Julia's optimal bundle? Show this solution graphically, putting G on the horizontal axis (label G* and J*, the IC at the optimum, the budget line, and all axes and other relevant points). (b) Although Julia was very happy to receive the gift certificate, Aunt Sally could have made Julia equally happy by spending less money (and sending cash instead). How much cash could Sally have given to make Julia as happy as she was in (a)? Describe in four sentences or less.