2. Maximize utility U = xy subject to 4x+3y = 60, where x and y are the two consumption goods, 4 is the price of good x, 3 is the price of good y, and 60 is the budget. a) Set up the Lagrangian objective function. How much is the utility-maximizing consumption bundle? b) Show that the second-order condition/s is/are met (Use H₂ to identify whether it is a maximum or a minimum). c) What is the maximum utility?
2. Maximize utility U = xy subject to 4x+3y = 60, where x and y are the two consumption goods, 4 is the price of good x, 3 is the price of good y, and 60 is the budget. a) Set up the Lagrangian objective function. How much is the utility-maximizing consumption bundle? b) Show that the second-order condition/s is/are met (Use H₂ to identify whether it is a maximum or a minimum). c) What is the maximum utility?
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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![2.
Maximize utility U = xy subject to 4x+3y=60, where x and y are the two
consumption goods, 4 is the price of good x, 3 is the price of good y, and 60 is the
budget.
a) Set up the Lagrangian objective function. How much is the utility-maximizing
consumption bundle?
b) Show that the second-order condition/s is/are met (Use H₂ to identify whether it is a
maximum or a minimum).
c) What is the maximum utility?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7ddc0b5e-ad47-48c8-b1c5-4731fff51670%2F15383bd8-8d6f-4d7f-bd0b-428ad75339c7%2F2i6brqp_processed.png&w=3840&q=75)
Transcribed Image Text:2.
Maximize utility U = xy subject to 4x+3y=60, where x and y are the two
consumption goods, 4 is the price of good x, 3 is the price of good y, and 60 is the
budget.
a) Set up the Lagrangian objective function. How much is the utility-maximizing
consumption bundle?
b) Show that the second-order condition/s is/are met (Use H₂ to identify whether it is a
maximum or a minimum).
c) What is the maximum utility?
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