PROBLEM 2 (A consumer has a daily income of $240 to buy two goods (X, Y). The price of X is $8 and the price of Y is $3. Theconsumer utility function is given byU(X,Y) = X2y1/2You are also told that his marginal utilities areMUX= 2XY¹/2MUy = (X²)1. Calculate the optimal quantity of good X and Y for this consumer.2.Suppose this consumer decides to consume only 25 units of good Y while remaining with the same utilitybundle level found in question (1). Find the new level of good X?ANSWER

Utility maximization refers to the process where individuals aim to allocate their resources in a…

A consumer has a daily income of $240 to buy two goods (X, Y). The price of X is $8 and the price of Y is $3. The consumer utility function is given by U(X,Y)= X²Y¹/2 You are also told that his marginal utilities are MUX = 2XY¹/2 MUY = 1. Calculate the optimal quantity of good X and Y for this consumer. 2. Suppose this consumer decides to consume only 25 units of good Y while remaining with the same utility bundle level found in question (1). Find the new level of good X?

A consumer has a daily income of $240 to buy two goods (X, Y). The price of X is $8 and the price of Y is $3. The consumer utility function is given by U(X,Y)= X²Y¹/2 You are also told that his marginal utilities are MUX = 2XY¹/2 MUY = 1. Calculate the optimal quantity of good X and Y for this consumer. 2. Suppose this consumer decides to consume only 25 units of good Y while remaining with the same utility bundle level found in question (1). Find the new level of good X?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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