1. Susie's utility function is given as: U(xy) = 2Vx/y. Assume that Susie's budget is initially $100, the price of good x is $1 and the price of each good y is $2. a. Find Susie's utility-maximizing bundle. Note that MU, = Vy/Vx and MU = VA/y www b. Explain why the relationship you found between the optimal quantities of x and y should make intuitive sense, given the way the two goods enter into the utility function and their initial prices. с. If Susie is given the option of having either a cash payment of $30 or a coupon for $1 off every unit of good y, which should she choose? Explain using graphs, words, and/or math.
1. Susie's utility function is given as: U(xy) = 2Vx/y. Assume that Susie's budget is initially $100, the price of good x is $1 and the price of each good y is $2. a. Find Susie's utility-maximizing bundle. Note that MU, = Vy/Vx and MU = VA/y www b. Explain why the relationship you found between the optimal quantities of x and y should make intuitive sense, given the way the two goods enter into the utility function and their initial prices. с. If Susie is given the option of having either a cash payment of $30 or a coupon for $1 off every unit of good y, which should she choose? Explain using graphs, words, and/or math.
Microeconomics A Contemporary Intro
10th Edition
ISBN:9781285635101
Author:MCEACHERN
Publisher:MCEACHERN
Chapter6: Consumer Choice And Demand
Section: Chapter Questions
Problem 6QFR
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Queation 1a, b, c
![1. Susie's utility function is given as: U(xy) = 2Vx/y. Assume that Susie's budget is initially $100, the
price of good x is $1 and the price of each good y is $2.
a. Find Susie's utility-maximizing bundle. Note that MU, = Vy/Vx and MU = VA/y
www
b.
Explain why the relationship you found between the optimal quantities of x and y should make intuitive
sense, given the way the two goods enter into the utility function and their initial prices.
с.
If Susie is given the option of having either a cash payment of $30 or a coupon for $1 off every unit of
good y, which should she choose? Explain using graphs, words, and/or math.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F322589a8-a774-4fda-bd0a-4ca1647b46bb%2Febdb6e37-1d14-44b9-a978-1b43fe38523d%2Fdjvj7r.png&w=3840&q=75)
Transcribed Image Text:1. Susie's utility function is given as: U(xy) = 2Vx/y. Assume that Susie's budget is initially $100, the
price of good x is $1 and the price of each good y is $2.
a. Find Susie's utility-maximizing bundle. Note that MU, = Vy/Vx and MU = VA/y
www
b.
Explain why the relationship you found between the optimal quantities of x and y should make intuitive
sense, given the way the two goods enter into the utility function and their initial prices.
с.
If Susie is given the option of having either a cash payment of $30 or a coupon for $1 off every unit of
good y, which should she choose? Explain using graphs, words, and/or math.
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