Question #4 Mary's preferences over X and Y correspond to the following utility function: U(X,Y) = XY3. Suppose that her income is M=$80 and that the market price of X is Px-$2, while that of Y is Py=$4 a) Find and plot her budget line, clearly indicating the intercepts and the slope. b) The marginal utility of X is MUx=Y³, while that of Y is MUy=3XY². Compute and show Mary's optimal consumption bundle on the same graph. c) Find her utility at her optimal consumption bundle, specifying the amount of satisfaction she derives from the last unit of each good purchased.

Question #4 Mary's preferences over X and Y correspond to the following utility function: U(X,Y) = XY3. Suppose that her income is M=$80 and that the market price of X is Px-$2, while that of Y is Py=$4 a) Find and plot her budget line, clearly indicating the intercepts and the slope. b) The marginal utility of X is MUx=Y³, while that of Y is MUy=3XY². Compute and show Mary's optimal consumption bundle on the same graph. c) Find her utility at her optimal consumption bundle, specifying the amount of satisfaction she derives from the last unit of each good purchased.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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