Now assume that the preference relation on his consumption set be represented by u(z, 9) = 3VE+y. When his income is equal to 1 and the priees of good z, p. a=1 and of good y, Py= 1, 1. Solve the utility maximization problem. 2. Does the solution caleulated here obey the "equal bang for buck' condition? Explain.
Now assume that the preference relation on his consumption set be represented by u(z, 9) = 3VE+y. When his income is equal to 1 and the priees of good z, p. a=1 and of good y, Py= 1, 1. Solve the utility maximization problem. 2. Does the solution caleulated here obey the "equal bang for buck' condition? Explain.
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter6: Consumer Choice Theory
Section: Chapter Questions
Problem 11SQ
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Question
Part 2 beginning with "now assume"
Expert Solution
Step 1
Answer:
Part 2:
Given,
Utility function:
Income=1
(1).
To solve the maximization problem let us set the Lagrange function :
x=2.25 will maximize the utility of the consumer given the income and prices.
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