Let x be eggs and y be bagels. An individual utility function is given by U(x, y) = ½ x + 1 y. This individual budget constraint is 4 = 2 x + 1 y. At the point at which this individual maximizes her utility level she buys how many unit(s) of x and how many unit(s) of y?
Let x be eggs and y be bagels. An individual utility function is given by U(x, y) = ½ x + 1 y. This individual budget constraint is 4 = 2 x + 1 y. At the point at which this individual maximizes her utility level she buys how many unit(s) of x and how many unit(s) of y?
Chapter7: Consumer Choice: Maximizing Utility And Behavioral Economics
Section: Chapter Questions
Problem 1WNG
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Let x be eggs and y be bagels. An individual utility function is given by U(x, y) = ½ x + 1 y. This individual budget constraint is 4 = 2 x + 1 y. At the point at which this individual maximizes her utility level she buys how many unit(s) of x and how many unit(s) of y?
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Step 1: Describe the problem
Given utility function
.......... (1)
Equation of budget constraint:
We have to find consumption bundle which maximizes the total utility subject to budget constraint.
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