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Given is the Total Utility Function along with Budget Constraint:                               &nbs

Given is the Total Utility Function along with Budget Constraint:                                                 

Utility Function:                                 U (X, Y) = X0.2Y0.3

Budget Constraint:                             I = XPx + Y Py

  1. What is the consumer’s marginal utility for X and for Y?
  2. Suppose the price of X is equal to 4 and the price of Y equal to 6. What is the utility maximizing proportion of X and Y in his consumption? {construct the budget constraint)
  3. If the total amount of money he is willing to spend on the two goods is equal to                 I= 60, how much of each will he consume?
  4. Calculate the optimal consumption of X and Y if the consumer has income I.
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