Question

Consider the following utility function: U = X^2 + Y^2 If P x = 3 and...

Consider the following utility function: U = X^2 + Y^2

If P x = 3 and P y = 2.5, and the income is I= 50. Find the optimal consumption bundle.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

At the optimal bundle, the following must be true

1. The optimal bundle lies on the budget line

2. The indifference curve is tangent to the budget line at the optimal bundle.

The equation for the budget line is

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Consider a consumer with a utility function U = x2/3y1/3, where x and y are the...
Consider a consumer with a utility function U = x2/3y1/3, where x and y are the quantities of each of the two goods consumed. A consumer faces prices for x of $2 and y of $1, and is currently consuming 10 units of good X and 30 units of good Y with all available income. What can we say about this consumption bundle? Group of answer choices a.The consumption bundle is not optimal; the consumer could increase their utility by...
3. Suppose that a consumer has a utility function given by U(X,Y) = X^.5Y^.5 . Consider...
3. Suppose that a consumer has a utility function given by U(X,Y) = X^.5Y^.5 . Consider the following bundles of goods: A = (9, 4), B = (16, 16), C = (1, 36). a. Calculate the consumer’s utility level for each bundle of goods. b. Specify the preference ordering for the bundles using the “strictly preferred to” symbol and the “indifferent to” symbol. c. Now, take the natural log of the utility function. Calculate the new utility level provided by...
Consider the utility function U(x,y) = xy Income is I=400, and prices are initially px =10...
Consider the utility function U(x,y) = xy Income is I=400, and prices are initially px =10 and py =10. (a) Find the optimal consumption choices of x and y. (b) The price of x changes, to px =40, while the price of y remains the same. What are the new optimal consumption choices for x and y? (c) What is the substitution effect? (d) What is the income effect?
) A consumer's utility function is given by: U(x,y) = 10xy Currently, the prices of goods...
) A consumer's utility function is given by: U(x,y) = 10xy Currently, the prices of goods x and y are $3 and $5, respectively, and the consumer's income is $150 . a. Find the MRS for this consumer for any given bundle (x,y) . b. Find the optimal consumption bundle for this consumer. c. Suppose the price of good x doubles. How much income is required so that the Econ 201 Beomsoo Kim Spring 2018 consumer is able to purchase...
1. Suppose utility for a consumer over food(x) and clothing(y) is represented by u(x,y) = 915xy....
1. Suppose utility for a consumer over food(x) and clothing(y) is represented by u(x,y) = 915xy. Find the optimal values of x and y as a function of the prices px and py with an income level m. px and py are the prices of good x and y respectively. 2. Consider a utility function that represents preferences: u(x,y) = min{80x,40y} Find the optimal values of x and y as a function of the prices px and py with an...
Assume that Sam has following utility function: U(x,y) = 2√x+y MRS=(x)^-1/2, px = 1/5, py =...
Assume that Sam has following utility function: U(x,y) = 2√x+y MRS=(x)^-1/2, px = 1/5, py = 1 and her income I = 10. price increase for the good x from px = 1/5 to p0x = 1/2. (a) Consider a price increase for the good x from px = 1/5 to p0x = 1/2. Find new optimal bundle under new price using a graph that shows the change in budget set and the change in optimal bundle when the price...
Claraís utility function is u (x; y) = (x + 2) (y + 1) where x...
Claraís utility function is u (x; y) = (x + 2) (y + 1) where x is her consumption of good x and y is her consumption of good y. (a) Write an equation for Claraís indi§erence curve that goes through the point (x; y) = (2; 8). (b) Suppose that the price of each good is $1 and Clara has an income of $11. Can Clara achieve a utility level of at least 36 with this budget? ( c)...
Consider the utility function U ( x,y ) = min { x , 2y }. (a)...
Consider the utility function U ( x,y ) = min { x , 2y }. (a) Find the optimal consumption choices of x and y when I=50, px=10, and py=5. (b) The formula for own-price elasticity of x is εx,px = (−2px/2px + py) For these specific values of income, prices, x and y, what is the own-price elasticity? What does this value tell us about x? (c) The formula for cross-price elasticity of x is εx,py = (py/2px +...
Consider the following utility function: U(x1,x2) X11/3 X2 Suppose a consumer with the above utility function...
Consider the following utility function: U(x1,x2) X11/3 X2 Suppose a consumer with the above utility function faces prices p1 = 2 and p2 = 3 and he has an income m = 12. What’s his optimal bundle to consume?
7. Suppose you have the following utility function for two goods: u(x1, x2) = x 1/3...
7. Suppose you have the following utility function for two goods: u(x1, x2) = x 1/3 1 x 2/3 2 . Suppose your initial income is I, and prices are p1 and p2. (a) Suppose I = 400, p1 = 2.5, and p2 = 5. Solve for the optimal bundle. Graph the budget constraint with x1 on the horizontal axis, and the indifference curve for that bundle. Label all relevant points (b) Suppose I = 600, p1 = 2.5, and...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT