Given: U(x,y) = x0.25 y0.75 MUx=0.25 x-0.75 y0.75 MUy = 0.75 x0.25 y-0.25 Px=2 Py=12   a)Find the minimum cost to reach a utility of 1,189.

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Given:

U(x,y) = x0.25 y0.75

MUx=0.25 x-0.75 y0.75

MUy = 0.75 x0.25 y-0.25

Px=2

Py=12

 

a)Find the minimum cost to reach a utility of 1,189.

b)Now assume that Px increases to 4 and find the new

minimum cost.

c) What is the savings from substitution in part b)?

d) From the part a) outcome, what lower Py would allow

a utility of 2,000?

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