- Sophia’s utility function is as follows: U = 10x0.8
y0.6
Budget constraint: 100 = 6x + 4y
- Solve for the utility-maximizing bundle
- Find the equation of the indifference curve that contains the
utility-maximizing bundle.
- Sketch the solution, labeling all relevant items, x on the
horizontal axis and y on the vertical axis.
- At the utility-maximizing bundle, what is the increase in
Mustapha’s utility from the last dollar spent on good X? What about
for good Y?
- Mustapha is moving to Maryland, where the price of X is 12 and
the price of Y is 3. Find the minimum income Mustapha needs to
maintain his current utility level (given by the bundle found in
part a).