Given the individual utility function U = 10x^0.5y^0.5. With income, m = $40, the price of good x, Px = $1, and the price of good y, Py = $4, the individual's utility is maximized at U = 100 (with x* = 20 units and y* = 5 units). When the price of good x (Px) increases from $1 to $4, how much income is needed to maintain the utility level at U = 100? [hints: your objective function and constraints should be correct] Select one: • a. The required income is $40 • b. The required income is $80 c. The required income is $100 • d. The required income is $20
Given the individual utility function U = 10x^0.5y^0.5. With income, m = $40, the price of good x, Px = $1, and the price of good y, Py = $4, the individual's utility is maximized at U = 100 (with x* = 20 units and y* = 5 units). When the price of good x (Px) increases from $1 to $4, how much income is needed to maintain the utility level at U = 100? [hints: your objective function and constraints should be correct] Select one: • a. The required income is $40 • b. The required income is $80 c. The required income is $100 • d. The required income is $20
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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