Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
![An individual has the following utility function: U = Z!/2 H/2, where Z is a
composite good and H is the level of health.
The individual has income, m = $100.
The price of the composite good, Z, is Pz = 1.
The price of health, H, is PH = 4.
What is the optimal consumption bundle of H and Z that maximizes utility? Show
your steps and show the decision graphically (which includes finding the endpoints of
the budget constraint).](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9d6e58ec-de62-4767-8b1c-6fdccde3e02e%2F2ee92a49-8290-4ff3-ade2-351027535cd4%2Fn8gqzrd_processed.jpeg&w=3840&q=75)
Transcribed Image Text:An individual has the following utility function: U = Z!/2 H/2, where Z is a
composite good and H is the level of health.
The individual has income, m = $100.
The price of the composite good, Z, is Pz = 1.
The price of health, H, is PH = 4.
What is the optimal consumption bundle of H and Z that maximizes utility? Show
your steps and show the decision graphically (which includes finding the endpoints of
the budget constraint).
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