Suppose that a consumer’s utility function for two goods (X and Y) is U(X,Y) = 10X^0.5 + 2Y , with MUx = 5X-0.5 and MUy = 2. The price of good X is $5 per unit, the price of good Y is $10 per unit, and the income is $275. a. Find the utility maximizing quantities of X and Y. b. If instead, the price of good Y is $20 per unit, how does your answer change?

Suppose that a consumer’s utility function for two goods (X and Y) is U(X,Y) = 10X^0.5 + 2Y , with MUx = 5X-0.5 and MUy = 2. The price of good X is $5 per unit, the price of good Y is $10 per unit, and the income is $275. a. Find the utility maximizing quantities of X and Y. b. If instead, the price of good Y is $20 per unit, how does your answer change?

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter20: Consumer Choice: Maximizing Utility And Behavioral Economics

Section: Chapter Questions

Problem 6QP

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