Question

The utility function and the prices are the following: U = 39 x1 + 6 x2...

The utility function and the prices are the following:

U = 39 x1 + 6 x2

P1=8,   P2=33 and I =6,657

What is the amount of maximized utility?

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

The given utility function is

The decision to consume a good depends on the maximum or equal per dollar marginal utility, where the utility function is linear so the consumer will consume one good with more per dollar marginal utility as the utility function is for substitute goods.

MU per dollar =MU/price

MU per dollar of X1=39/8=4.875

MU per dollar of X2=6/33=0.181818182

MU per dollar is higher for X1 so the consumer will purchase only good 1.

The quantity of good 1 =income /price=6657/8

=832.125

the amount of utility is

U=39*832.125

=32452.875

The amount of maximum utility is 32452.875 utils

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 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?
Consider the utility function: u( x1 , x2 ) = 2√ x1 + 2√x2 a) Find...
Consider the utility function: u( x1 , x2 ) = 2√ x1 + 2√x2 a) Find the Marshallian demand function. Use ( p1 , p2 ) to denote the exogenous prices of x1 and x2 respectively. Use y to denote the consumer's disposable income. b) Find the indirect utility function and verify Roy's identity c) Find the expenditure function d) Find the Hicksian demand function
Suppose x1 and x2 are perfect substitutes with the utility function U(x1, x2) = 2x1 +...
Suppose x1 and x2 are perfect substitutes with the utility function U(x1, x2) = 2x1 + 6x2. If p1 = 1, p2 = 2, and income m = 10, what it the optimal bundle (x1*, x2*)?
The utility function is given by u (x1,x2) = x1^0.5 + x2^0.5 1) Find the marginal...
The utility function is given by u (x1,x2) = x1^0.5 + x2^0.5 1) Find the marginal rate of substitution (MRSx1,x2 ) 2) Derive the demand functions x1(p1,p2,m) and x2(p1, p2,m) by using the method of Lagrange.
Consider the following Constant Elasticity of Substitution utility function U(x1,x2) = x1^p+x2^p)^1/p                         &nbs
Consider the following Constant Elasticity of Substitution utility function U(x1,x2) = x1^p+x2^p)^1/p                                                                                                                                           a. Show that the above utility function corresponds to (hint:use the MRS between good 1 and good 2. The ->refers to the concept of limits.                  1. The perfect substitute utility function at p=1 2. The Cobb-Douglas utility function as p -->0 3. The Leontiff (of min(x1,x2) as p--> -infinity b. For infinity<p<1, a given level of income I and prices p1 and p2. 1. Find the marshallian...
The utility function is given by u (x1, x2) = x1^0.5+x2^0.5 1) Find the marginal rate...
The utility function is given by u (x1, x2) = x1^0.5+x2^0.5 1) Find the marginal rate of substitution (MRSx1,x2 ) 2) Derive the demand functions x1(p1, p2, m) and x2(p1,p2, m) by using the method of Lagrange.
Consider utility function u(x1,x2) =1/4x12 +1/9x22. Suppose the prices of good 1 and good 2 are...
Consider utility function u(x1,x2) =1/4x12 +1/9x22. Suppose the prices of good 1 and good 2 are p1 andp2, and income is m. Do bundles (2, 9) and (4, radical54) lie on the same indifference curve? Evaluate the marginal rate of substitution at (x1,x2) = (8, 9). Does this utility function represent convexpreferences? Would bundle (x1,x2) satisfying (1) MU1/MU2 =p1/p2 and (2) p1x1 + p2x2 =m be an optimal choice? (hint: what does an indifference curve look like?)
1. Using the following utility function, U(x1,x2) = x1x2+x1+2x2+2 Find the demand functions for both x1...
1. Using the following utility function, U(x1,x2) = x1x2+x1+2x2+2 Find the demand functions for both x1 and x2 (as functions of p1, p2, and m). Thank you!
Suppose the utility function is given by U(x1, x2) = 14 min{2x, 3y}. Calculate the optimal...
Suppose the utility function is given by U(x1, x2) = 14 min{2x, 3y}. Calculate the optimal consumption bundle if income is m, and prices are p1, and p2.
Qin has the utility function U(x1, x2) = x1 + x1x2, where x1 is her consumption...
Qin has the utility function U(x1, x2) = x1 + x1x2, where x1 is her consumption of good 1 and x2 is her consumption of good 2. The price of good 1 is p1, the price of good 2 is p2, and her income is M. Setting the marginal rate of substitution equal to the price ratio yields this equation: p1/p2 = (1+x2)/(A+x1) where A is a number. What is A? Suppose p1 = 11, p2 = 3 and M...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT