Chao's utility function is ♦ = 4��1/2 + ��2. She faces prices ��1 and ��2 and income (a) Write the Lagrangian for Chao's utility maximization problem. (b) Use the Lagrangian to solve for the optimal quantities of �1 and ��2 in terms of income and prices. (c) How much income must Chao have to consume both goods?
Chao's utility function is ♦ = 4��1/2 + ��2. She faces prices ��1 and ��2 and income (a) Write the Lagrangian for Chao's utility maximization problem. (b) Use the Lagrangian to solve for the optimal quantities of �1 and ��2 in terms of income and prices. (c) How much income must Chao have to consume both goods?
Chapter4: Utility Maximization And Choice
Section: Chapter Questions
Problem 4.13P
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Transcribed Image Text:Chao's utility function is ♦ = 4��1/2 + ��2.
She faces prices ��1 and ��2 and income
(a) Write the Lagrangian for Chao's utility maximization
problem.
(b) Use the Lagrangian to solve for the optimal
quantities of �1 and ��2 in terms of income and
prices.
(c) How much income must Chao have to consume
both goods?
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