Harry consumes 2 goods, X and Y and he spends N$60 per month. The price of good X is N$4and the price of good Y is N$10. Harry's utility function is U(X, Y) = XY.(i) What is Harry's marginal rate of substitution? (5)(ii) What is the expression for Harry's budget constraint? (3)(iii) What is the slope of Harry's budget constraint? (2)(iv)Find the values of good X and Y maximizes Harry's utility. Show all your work. (6)(v) Illustrate Harry's utility maximizing combination on a clearly labelled graph. (4)(vi) Suppose the price of good X increased to N$6. Illustrate Harry's income and substitutioneffects on a well labelled graph. Show your work. (10)(vii) Suppose Genie is consuming two goods, coffee and beer. She spends all her income ona combination of coffee and beer where MUcoffee/Peoffee is 5 and MUbeer/Pbeer is 3.Explain why this combination is not maximizing her satisfaction. What should she doto maximize her utility? (5)

Harry consumes 2 goods, X and Y and he spends N$60 per month. The price of good X is N$4 and the price of good Y is N$10. Harry's utility function is U(X, Y) = XY. ) What is Harry's marginal rate of substitution? (5) (ii) What is the expression for Harry's budget constraint? (3) (iii) What is the slope of Harry's budget constraint? (2)

Harry consumes 2 goods, X and Y and he spends N$60 per month. The price of good X is N$4 and the price of good Y is N$10. Harry's utility function is U(X, Y) = XY. ) What is Harry's marginal rate of substitution? (5) (ii) What is the expression for Harry's budget constraint? (3) (iii) What is the slope of Harry's budget constraint? (2)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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i) Derive consumer's budget constraint ii) Derive the marginal utility X and marginal utility Y iii) Find out the consumer optimum combination of good X and Y at the market.
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