ZuoTi.Pro
Question

Price of x is 12 and price of y is 8. income is $600 U(x, y)=x^0.4 y^0.6

set up lagurangian, write down first order conditions, solve the system of equation in first order condition to find the optimal x and y and \lambda. explain how you interpret the value of  \lambda. and then, find the marginal utility of good x when the consumer chooses the optimal bundle.

please solve this step by step.

business   economics   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

= x 4y66 Px = 12 Py = 8 I 100 (Price of (Pose of y). (Income Budget Constroint: x. Px + 4. Py = I > 12x +84 600 Set up lagrinEguate eguaten 4 and 6. > on 64900 (39) 04 > 6) - 2025 -> X = 2:254 - 12 put (6 in (3). 12x + 8y - 600 12. (2.254) + 8y = 6010. • уеб de Mur du lux Mux = 04 X-Ow6yo: Nuo 106 * aut y = 17:14 and x = 38.56. MUX = 0.4 / 17:14 10.6 Mux .0.2459 38.56 Mar

0 0
Add a comment
Know the answer?
Add Answer to:
Price of x is 12 and price of y is 8. income is $600 U(x, y)=x^0.4...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • 1. Price of x is 12 and price of y is 8. Answer the following questions...

    1. Price of x is 12 and price of y is 8. Answer the following questions for a consumer who earns $600 and whose preference can be represented with the utility functions U(x,y) x0.4y0.6 = a) Write down the utility maximization problem. (2 points) b) Does the utility function represent convex preference? Explain. (2 points) c) Write down the budget constraint. What is the slope of the budget line? (2 points) d) What is the slope of the indifference curve...

  • Part 1: Find the marginal utility of an additional unit of good x for a consumer...

    Part 1: Find the marginal utility of an additional unit of good x for a consumer with utility function when their current consumption level is and Part 2: Find the marginal rate of substitution between goods and for a consumer with utility function when their current consumption level is and u (z, y) x-y- 2 = 16 We were unable to transcribe this imageWe were unable to transcribe this imageWe were unable to transcribe this imageWe were unable to transcribe...

  • We can expect the solution u(x,y) to be in the form X(x)Y(y). or I believe that...

    We can expect the solution u(x,y) to be in the form X(x)Y(y). or I believe that these are the correct forms of X(x) and Y(y). 2. Laplace's equation Consider Laplace's equation on the rectangle with 0 < x < L and 0 < < H: PDE BC BC BC u(x,0) 0, u(z, H) = g(z). (10) where a mixture of Dirichlet and Neumann boundary conditions is specified, and only one of the sides has a boundary condition that is nonhomogeneous...

  • Refer to the table above. Assume that the price of good X is $2 per unit,...

    Refer to the table above. Assume that the price of good X is $2 per unit, the price of good Y is $5 per unit, and that the consumer spends a total of $44 on both goods.  What combination of X and Y will the consumer purchase in order to maximize utility? A. We don’t have enough information of determine his consumption bundle. B. He will spend more on X than on Y because X is less expensive than Y. C....

  • Suppose that a consumer’s utility function is U=xy with MUx=y and MUy=x. Suppose the consumer‘s income...

    Suppose that a consumer’s utility function is U=xy with MUx=y and MUy=x. Suppose the consumer‘s income is $480. For this question you may need to use the following approximations: sqrt(2) is approximately 1.4, sqrt(3) is approx. 1.7 and sqrt(5) is approx 2.2. a) Initially, the price of y is $4 and the price of x is $6. What is the consumer’s optimal bundle? b) What is the consumer's initial utility? Now suppose that price of x increases to $8 and...

  • If pA = $10, PB = $5,Y = $75, where p is the price of a...

    If pA = $10, PB = $5,Y = $75, where p is the price of a good, A and B are goods, and Y is income. Given that the utility function is U = 25A2B, determine the optimal bundle of x and yfor this consumer. Be sure to show your work and box your answers. a) Solve for the marginal utility of A and the marginal utility of B b) Solve for the relationship (trade-off) between A and B c)...

  • 2. Consider the Cobb-Douglas utility function u(x,y) = x2y2. Let the budget 1, where pr, py...

    2. Consider the Cobb-Douglas utility function u(x,y) = x2y2. Let the budget 1, where pr, py are the prices and I denotes the constraint be prx + pyy income. (a) Write the Lagrangian for this utility maximization problem. (b) Solve the first-order conditions to find the demand functions for both good a and good y. [Hint: Your results should only depend on the pa- rameters pa, Py, I.] (c) In the optimal consumption bundle, how much money is spend on...

  • ) A consumer's utility function is given by: U(x,y) = 10xy Currently, the prices of goods x and y...

    ) A consumer's utility function is given by: U(x,y) = 10xy Currently, the prices of goods x and y are $3 and $5, respectively, and the consumer's income is $150 . a. Find the MRS for this consumer for any given bundle (x,y) . b. Find the optimal consumption bundle for this consumer. c. Suppose the price of good x doubles. How much income is required so that the Econ 201 Beomsoo Kim Spring 2018 consumer is able to purchase...

  • Q5.      Suppose that marginal utility of Good X = 100, the price X is $10 per...

    Q5.      Suppose that marginal utility of Good X = 100, the price X is $10 per unit, and the price of Y is $5 per unit. Assuming that the consumer is in equilibrium and is consuming both X and Y, what must the marginal utility of Y be?    P12.     The following tables illustrate Eileen’s utilities from watching first-run movies in a theater and from renting movies from a video store. Suppose that she has a monthly movie budget of $36,...

  • Suppose an individual had a utility function given by: U=X^0.4*Y^5. The price of Good X is...

    Suppose an individual had a utility function given by: U=X^0.4*Y^5. The price of Good X is $5 and the price of Good Y is $1. The individual has a budget of $472.50. Solve the optimization condition for Y given the values above and fill in the blank below. Y = ____ X?

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT