Question

Given utility function U=


where PX = 12 Birr, Birr, PY = 4 Birr and the income of
the consumer is, M= 240 Birr.
A. Find the utility maximizing combinations of X and Y.
B. Calculate marginal rate of substitution of X for Y (MRSX,Y) at equilibrium and interpret
your result

Answer 1

Answer:

What are synthetic fabrics? Synthetic fibres (man-made fibres) are produced by joining chemical monomers into polymers using a chemical reaction called polymerisation. The chemicals used are usually sodium hydroxide and carbon disulphide (derivatives of coal, oil, or natural gas

Answer 2

Answer:

MUx=0.5

y0.5

x0.5

MU_y=0.5 \frac {x^{0.5}}{y^{0.5}}MU

y

=0.5

y

0.5

x

0.5

{\frac{MU_x}{p_x}}=\frac {MU_y}{p_y}

p

x

MU

x

=

p

y

MU

y

x \times p_x+ y \times p_y=Mx×p

x

+y×p

y

=M

y= 3x

12* x+4*y=240

x=10, y=30

D)

\frac {\partial U}{\partial x \partial y} =\frac {0.25} {(xy)^{0.5}}

∂x∂y

∂U

=

(xy)

0.5

0.25

MRS x.y = \frac {\partial U} {\partial x \partial y} = \frac {0.25}{(10 \times 30)^{0.5}}=0.015MRSx.y=

∂x∂y

∂U

=

(10×30)

0.5

0.25

=0.015