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Cobb-Douglas Example 1. Caitlyn's utility is given by U = X x Y, where MUX = Y and MUX. Px=2 P = 4 and M = 80. a. What is Caitlyn's MRS at X = 30 and Y = 5? b. Why is X = 30 and Y = 5 not her optimal bundle? c. Find her optimal consumption bundle.

Cobb-Douglas Example 1. Caitlyn's utility is given by U = X x Y, where MUX = Y and MUX. Px=2 P = 4 and M = 80. a. What is Caitlyn's MRS at X = 30 and Y = 5? b. Why is X = 30 and Y = 5 not her optimal bundle? c. Find her optimal consumption bundle.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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a,b,c

**Cobb-Douglas Example** 1. Caitlyn’s utility is given by \( U = X \times Y \), where \( MU_X = Y \) and \( MU_Y = X \). \( P_X = 2 \), \( P_Y = 4 \), and \( M = 80 \). a. What is Caitlyn’s MRS at \( X = 30 \) and \( Y = 5 \)? b. Why is \( X = 30 \) and \( Y = 5 \) not her optimal bundle? c. Find her optimal consumption bundle.
Transcribed Image Text:**Cobb-Douglas Example** 1. Caitlyn’s utility is given by \( U = X \times Y \), where \( MU_X = Y \) and \( MU_Y = X \). \( P_X = 2 \), \( P_Y = 4 \), and \( M = 80 \). a. What is Caitlyn’s MRS at \( X = 30 \) and \( Y = 5 \)? b. Why is \( X = 30 \) and \( Y = 5 \) not her optimal bundle? c. Find her optimal consumption bundle.
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MRS, marginal rate of substitution is the slope of indifference curve. It is the rate at which X is substituted for Y.

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