If MU x1 = 5 x2 and MU x2 = 10*x1*x2 with x1 and x2 goods. P1 = $2 and P2 = $5 with an income of $10Determine quantities for x1 and x2 maximizing consumer utility and determine Utility ConsumerNote: MU is Marginal Utility Function for x1 and x2 respectively

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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If MU x₁ = 5 x₂ and MU x₂ = 10*x₁*x₂ with x₁ and x₂ goods. P1 = $2 and P2 = $5 with an income of $10

Determine quantities for x₁ and x₂ maximizing consumer utility and determine Utility Consumer

Note: MU is Marginal Utility Function for x₁ and x₂ respectively

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Step 1: Introduction

Utility is the total satisfaction that the consumer derives from the consumption of the two goods.
The consumer maximises his utility given his income and price level.

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Follow-up Question

MRS = 1/2x₁ , so x₁ = 1.25 and x₂ = 1.5

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