ppose a consumer has the following utility function: U(x1,x2)=x1*x2. Therefore, the MRS is equal to x2/x1. Compute the optimal basket (both x1 and x2) if I=1000, p1=8, p2=2. Show the indifference curve on which the optimal basket lies in a graph. Make sure to clearly compute and show in the graph the budget line as well, including the maximum possible quantities of each g

Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter6: Consumer Choice Theory
Section6.A: Indifference Curve Analysis
Problem 1SQP
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Suppose a consumer has the following utility function: U(x1,x2)=x1*x2. Therefore, the MRS is equal to x2/x1. Compute the optimal basket (both x1 and x2) if I=1000, p1=8, p2=2. Show the indifference curve on which the optimal basket lies in a graph. Make sure to clearly compute and show in the graph the budget line as well, including the maximum possible quantities of each good
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