2 An individual's utility function is given by U = x;X2 where x, and x, denote the number of items of two goods, G1 and G2. The prices of the goods are $2 and $10 respectively. Assuming that the individual has $400 available to spend on these goods, find the utility-maximizing values of x, and x2. Verify that the ratio of marginal utility to price is the same

2 An individual's utility function is given by U = x;X2 where x, and x, denote the number of items of two goods, G1 and G2. The prices of the goods are $2 and $10 respectively. Assuming that the individual has $400 available to spend on these goods, find the utility-maximizing values of x, and x2. Verify that the ratio of marginal utility to price is the same

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

2 An individual's utility function is given by
U = x,x2
where x, and x, denote the number of items of two goods, G1 and G2. The prices of the goods are $2
and $10 respectively. Assuming that the individual has $400 available to spend on these goods, find
the utility-maximizing values of x, and X2. Verify that the ratio of marginal utility to price is the same
for both goods at the optimum.

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