ate the const mer's max zation problem and express this in words. ow let Px = 10, Py=20 and income M = 2000. Find optimal X*, Y*, and the resulting Ut U*). Show your work.
ate the const mer's max zation problem and express this in words. ow let Px = 10, Py=20 and income M = 2000. Find optimal X*, Y*, and the resulting Ut U*). Show your work.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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solve e, f, and g please
Thank you
![(a) Suppose we have preferences U(X, Y) = min [X, 3Y]. Graph/sketch the indifference curve
through the bundle (X = 30, Y = 30). What is the utility of (30, 30) and explain why the
indifference curves look the way they do.
(b) What does the Marginal Rate of Substitution tell us about preferences? <
(c) Why is the Marginal Rate of Substitution not applicable in this example? <
(d) What do we mean by a composite good? What does this composite good look like with these
preferences? Show and explain.<
(e) State the consumer's maximization problem and express this in words.<
(f) Now let Px = 10, Px= 20 and income M = 2000. Find optimal X*, Y*, and the resulting Utility
(U*). Show your work. <
(g) Now let Py = 15. How does optimal consumption (X*.Y*) and utility (U*) change relative to
(e)? Explain in simple terms and show in a diagram.<](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Faf4d5614-e5fa-4399-aabc-c345eeef0588%2F482e2d81-453b-49db-846d-d20870da0f30%2Frqzdx8j_processed.png&w=3840&q=75)
Transcribed Image Text:(a) Suppose we have preferences U(X, Y) = min [X, 3Y]. Graph/sketch the indifference curve
through the bundle (X = 30, Y = 30). What is the utility of (30, 30) and explain why the
indifference curves look the way they do.
(b) What does the Marginal Rate of Substitution tell us about preferences? <
(c) Why is the Marginal Rate of Substitution not applicable in this example? <
(d) What do we mean by a composite good? What does this composite good look like with these
preferences? Show and explain.<
(e) State the consumer's maximization problem and express this in words.<
(f) Now let Px = 10, Px= 20 and income M = 2000. Find optimal X*, Y*, and the resulting Utility
(U*). Show your work. <
(g) Now let Py = 15. How does optimal consumption (X*.Y*) and utility (U*) change relative to
(e)? Explain in simple terms and show in a diagram.<
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