he Calculus of Utility Maximization and Expenditure Minimization - End of Appendix Problem appose that there are two goods, X and Y. The price of X is $2 per unit, and the price of Y is $1 per unit. There are two onsumers, A and B. The utility functions for the consumers are UA(X,Y)= Xosyas UB(X,Y)= X08y0.2 Consumer A has an income of $100, and Consumer B has an income of $300. Using Lagrangians, solve for the optimal bundles of goods X and Y for both consumers A and B. a. The optimal bundle for consumer A is X=25 and Y* = 50 b. The optimal bundle for consumer B is X = 120 and Y* = 60

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Chapter6: Consumer Choice Theory
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he Calculus of Utility Maximization and Expenditure Minimization
-End of Appendix Problem
uppose that there are two goods, X and Y. The price of X is $2 per unit, and the price of Y is $1 per unit. There are two
onsumers, A and B. The utility functions for the consumers are
UA(X,Y)= X05.05
UB(X,Y)= X0.8y0.2
Consumer A has an income of $100, and Consumer B has an income of $300.
Using Lagrangians, solve for the optimal bundles of goods X and Y for both consumers A and B.
a. The optimal bundle for consumer A is
X = 25 and Y* = 50
-
b. The optimal bundle for consumer B is
X = 120 and Y* = 60
Transcribed Image Text:he Calculus of Utility Maximization and Expenditure Minimization -End of Appendix Problem uppose that there are two goods, X and Y. The price of X is $2 per unit, and the price of Y is $1 per unit. There are two onsumers, A and B. The utility functions for the consumers are UA(X,Y)= X05.05 UB(X,Y)= X0.8y0.2 Consumer A has an income of $100, and Consumer B has an income of $300. Using Lagrangians, solve for the optimal bundles of goods X and Y for both consumers A and B. a. The optimal bundle for consumer A is X = 25 and Y* = 50 - b. The optimal bundle for consumer B is X = 120 and Y* = 60
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