Let the utility function be given by u(x1, x2) = √ x1 + √ x2. Let m be the income of the consumer, p1 and p2 the prices of good 1 and good 2, respectively. (a) Write down the budget constraint and illustrate the set of feasible bundles using a figure. (b) Suppose that m = 24, p1 = 2 and p2 = 4 . Find the optimal bundle for the consumer. In other words, find the combination of x1 and x2 that maximizes the consumer’s utility when the prices are p1 = 2 and p2 = 4, and her income is m = 24. (c) Determine the Marshallian demand function. (d) Determine the expenditure function.

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Form Utility

The term utility in general refers to the satisfaction earned from usage of a particular product or service. Utility always plays an important role because it influences various important elements like demand & thereby the price of the good or service as well. Though utility is not easy to measure, various types of economic models can be used indirectly. There can be various types of utilities like economic utility, marginal utility, cardinal utility, form utility.