1. What will be the maximing level of Q1?2. What will be the maximing level of Q2?3. What is the result of the computed λ ? Maximize utility u = Q1 Q2 + Q1 + 2Q2, subject toP₁ = 2, P2 = 5 and B = 51 where;u = utility;Q₁= good Q₁Q2 = good Q2P₁ = price of Good Q₁P2 = price of Good Q2

Consumer gets maximum utility at equilibrium point where MRS = P1/P2 . With given level of budget…

Answered: Maximize utility u = Q1 Q2 + Q1 +2Q2,…

Maximize utility u = Q1 Q2 + Q1 +2Q2, subject to P₁ = 2, P₂ = 5 and B = 51 where; u = utility; Q₁ = good Q₁ Q2 = good Q2 P₁ = price of Good Q₁ P2 = price of Good Q₂

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

100%

1. What will be the maximing level of Q1?

2. What will be the maximing level of Q2?

3. What is the result of the computed λ ?

Maximize utility u = Q1 Q2 + Q1 + 2Q2, subject to
P₁ = 2, P2 = 5 and B = 51 where;
u = utility;
Q₁= good Q₁
Q2 = good Q2
P₁ = price of Good Q₁
P2 = price of Good Q2

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