Mike’s utility function is U(x,y) = x0.25y0.25, The price of good x is 2 and the price of good y is 2. Mike's income is I= 40. What are the amounts of good x and good y that maximize Mike's utility? What is the highest level а. of utility Mike can attain? You can use any method you want. b. Suppose that the prices of good x and good y double. That is, the new price of x is 4 and the new price of y is 4. What are the amounts of x and y that maximize Mike's utility now? How much extra income should we give Mike, so that he is able to attain the utility level from (a) with the prices of x and y from (b)? С. d. Suppose that price of good x is 2 and the price of good y is 2. Mike's income is still 40. However, his utility changes to U(x, y) = x0.5y0.5. what are the amounts of good x and good y that maximize Mike's utility now?

Mike’s utility function is U(x,y) = x0.25y0.25, The price of good x is 2 and the price of good y is 2. Mike's income is I= 40. What are the amounts of good x and good y that maximize Mike's utility? What is the highest level а. of utility Mike can attain? You can use any method you want. b. Suppose that the prices of good x and good y double. That is, the new price of x is 4 and the new price of y is 4. What are the amounts of x and y that maximize Mike's utility now? How much extra income should we give Mike, so that he is able to attain the utility level from (a) with the prices of x and y from (b)? С. d. Suppose that price of good x is 2 and the price of good y is 2. Mike's income is still 40. However, his utility changes to U(x, y) = x0.5y0.5. what are the amounts of good x and good y that maximize Mike's utility now?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter4: Utility Maximization And Choice

Section: Chapter Questions

Problem 4.5P

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