A consumer has a daily income of $240 to buy two goods (X, Y). The price of X is $8 and the price of Y is $3. The consumer utility function is given by U(X,Y)= X²Y¹/2 You are also told that his marginal utilities are MUX = 2XY¹/2 MUY = 1. Calculate the optimal quantity of good X and Y for this consumer. 2. Suppose this consumer decides to consume only 25 units of good Y while remaining with the same utility bundle level found in question (1). Find the new level of good X?
A consumer has a daily income of $240 to buy two goods (X, Y). The price of X is $8 and the price of Y is $3. The consumer utility function is given by U(X,Y)= X²Y¹/2 You are also told that his marginal utilities are MUX = 2XY¹/2 MUY = 1. Calculate the optimal quantity of good X and Y for this consumer. 2. Suppose this consumer decides to consume only 25 units of good Y while remaining with the same utility bundle level found in question (1). Find the new level of good X?
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter6: Consumer Choice Theory
Section: Chapter Questions
Problem 5SQP
Related questions
Question
Transcribed Image Text:PROBLEM 2 (
A consumer has a daily income of $240 to buy two goods (X, Y). The price of X is $8 and the price of Y is $3. The
consumer utility function is given by
U(X,Y) = X2y1/2
You are also told that his marginal utilities are
MUX
= 2XY¹/2
MUy = (X²)
1. Calculate the optimal quantity of good X and Y for this consumer.
2.
Suppose this consumer decides to consume only 25 units of good Y while remaining with the same utility
bundle level found in question (1). Find the new level of good X?
ANSWER
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 4 steps with 11 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Economics (MindTap Course List)
Economics
ISBN:
9781337617383
Author:
Roger A. Arnold
Publisher:
Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:
9781337617383
Author:
Roger A. Arnold
Publisher:
Cengage Learning
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc
