Question

PROBLEM Dane onions eating apples and cupcakes and has $72 available to spend on these two SINN A tha mida ner anple is $1. Diane Sun function is UCA = 25CPA, where * 23CA, where is the number of cupcakes, and A is the number of is the number of cupcakes applies Dame's goal is to maximize her utility Determine the number of apples and cupcakes that Diane will purchase

Answer 1

ANswer

a consumer consumes at marginal utility per dollar is equal

L = 50CA acas MUC = U_0 (25C2A) MU, QU0 (25c2. = 25C2 - Rau MRS = MU, MRS = = sốOA 2A 25C2 = C. PA 1 2A-4 2A = 40 A= 20 budget line equation is 4C + A = 72 40 + 2C = 72 6C = 72 C = 12 A= 2 * 12 = 24

the optimum quantity is the cupcake of 12 units and apples is 24 units