Suppose a consumer's utility function is u(x, y) = ;V+), with x and y the 6. amounts of two goods the consumer buys. The prices of the two goods are p, = $1 and py = $2, %3D respectively. He/she can spend no more than $300. 1) Set up the consumer's problem. 2) Find the optimal consumption bundle (x, y) which will maximize his/her utility function. 3) Find the change in the optimal value of the utility if the consumer can spend no more than $301, not $300. 4) Explain the intuition behind your results of 3).

Suppose a consumer's utility function is u(x, y) = ;V+), with x and y the 6. amounts of two goods the consumer buys. The prices of the two goods are p, = $1 and py = $2, %3D respectively. He/she can spend no more than $300. 1) Set up the consumer's problem. 2) Find the optimal consumption bundle (x, y) which will maximize his/her utility function. 3) Find the change in the optimal value of the utility if the consumer can spend no more than $301, not $300. 4) Explain the intuition behind your results of 3).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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