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X, Y) = 3XY². The current market price for X is $10, while the market price for Y is $5. Ily's current income is $500. Write the expression for Sally's budget constraint. Graph the budget constraint and determine its -pe. Determine the X", Y* combination which maximizes Sally's utility, given her budget constraint. ow her optimum point on a graph. (Partial units for the two quantities are possible.)

X, Y) = 3XY². The current market price for X is $10, while the market price for Y is $5. Ily's current income is $500. Write the expression for Sally's budget constraint. Graph the budget constraint and determine its -pe. Determine the X", Y* combination which maximizes Sally's utility, given her budget constraint. ow her optimum point on a graph. (Partial units for the two quantities are possible.)

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Sally consumes two goods, X and Y. Her utility function is given by the expression U(X, Y) = 3XY². The current market price for X is $10, while the market price for Y is $5. Sally's current income is $500. a. Write the expression for Sally's budget constraint. Graph the budget constraint and determine its slope. b. Determine the X*, Y* combination which maximizes Sally's utility, given her budget constraint. Show her optimum point on a graph. (Partial units for the two quantities are possible.) c. Calculate the impact on Sally's optimum market basket of an increase in the price of X to $15. What would happen to her utility as a result of the price increase? Be specific.
Transcribed Image Text:Sally consumes two goods, X and Y. Her utility function is given by the expression U(X, Y) = 3XY². The current market price for X is $10, while the market price for Y is $5. Sally's current income is $500. a. Write the expression for Sally's budget constraint. Graph the budget constraint and determine its slope. b. Determine the X*, Y* combination which maximizes Sally's utility, given her budget constraint. Show her optimum point on a graph. (Partial units for the two quantities are possible.) c. Calculate the impact on Sally's optimum market basket of an increase in the price of X to $15. What would happen to her utility as a result of the price increase? Be specific.
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