Q1. Assume you are given $20 a week to spend only on your favorite choices of drinks. Youhave two favorite drinks: Di costs $2 and D2 costs $4. Your utility from the purchase of yourdrinks is U(D₁) and U(D2). The values of utilities are given below -D₁012345U(D₁)01220263032D₂013U(D₂)02 3325204044446X is the number of D1 and Y is the number of D2 you purchase in a week.a) What combination of X and Y would make you a utility maximizer?b) If you are not maximizing your utility, how should you reallocate your allowance? Explain.

You have $20 a week to spend only on your favorite choices of drinks. There are two drinks, D1 and…

Q1. Assume you are given $20 a week to spend only on your favorite choices of drinks. You have two favorite drinks: Di costs $2 and D2 costs $4. Your utility from the purchase of your drinks is U(D¹) and U(D2). The values of utilities are given below -

Q1. Assume you are given $20 a week to spend only on your favorite choices of drinks. You have two favorite drinks: Di costs $2 and D2 costs $4. Your utility from the purchase of your drinks is U(D¹) and U(D2). The values of utilities are given below -

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

Q1. Assume you are given $20 a week to spend only on your favorite choices of drinks. You
have two favorite drinks: Di costs $2 and D2 costs $4. Your utility from the purchase of your
drinks is U(D₁) and U(D2). The values of utilities are given below -
D₁
0
1
2
3
4
5
U(D₁)
0
12
20
26
30
32
D₂
0
1
3
U(D₂)
0
2 3
32
5
20
40
444
46
X is the number of D1 and Y is the number of D2 you purchase in a week.
a) What combination of X and Y would make you a utility maximizer?
b) If you are not maximizing your utility, how should you reallocate your allowance? Explain.

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