A consumer has GH¢600 to spend on two commodities, A and B. Commodity A costs GH¢20 per unit and Commodity B costs GH¢30 per unit. Suppose that the utility derived by the consumer from x units of Commodity A, and y Commodity B is given by the Cobb-Douglas utility function U (x, y) = 10x060.4 a. How many units of each commodity should the consumer buy to maximize utility? b. Is the budget constraint binding?
A consumer has GH¢600 to spend on two commodities, A and B. Commodity A costs GH¢20 per unit and Commodity B costs GH¢30 per unit. Suppose that the utility derived by the consumer from x units of Commodity A, and y Commodity B is given by the Cobb-Douglas utility function U (x, y) = 10x060.4 a. How many units of each commodity should the consumer buy to maximize utility? b. Is the budget constraint binding?
Chapter21: Demand: Consumer Choic
Section: Chapter Questions
Problem 1E
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