Question

given utility function u=where px=12birr,py=4birr and the income of the consumer is M=240 birr
find the utility maximizing combination of x and y

Answer 1

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

Explanation:

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