Question

suppose man offers to trade him a unit of x for six units of y. calculate new utilty maximizing production and consumption. show results in graph

2:49 Expert Q&A + X= (2) Lx y=25(ly) Ulwy) = (xy) 100 unity of Labour (6) broly also What is stility marinzing production & consumption of x ty? Hint: use the relation between MRPT & MRS Expert Answer Kalam9746 4 hours later MRT shows substitution of Y to produce one additional unit of X. MRS shows substitution of Y to consume one additional unit of X. MRT=MPL of x/MPL of Y=0.5/(12.5/ VLy)=0.5/Ly/12.5 MRS=MUX/MUY=X/Y=(0.5Lx)/(25(Ly) MRS=MRT Lx/50/Ly="Ly/25/Ly Lx=2 Ly{ optimal labour allocation condition} Lx+y=100 2Ly+Ly=100 Ly=100/3 Lx=200/3 So utility Maximizing production and consumption equals to, X=0.5*200/3=100/3=33.33 Y=25/100/3=250//3=144.33 Do

Answer 1

x= LX Y = Jly LA + LY = | 06 x= y= Six rly 7 Lx= x2 » Ly = y2 - given by Equation of PPF is LX+ Ly = 100 x² + y2 =100 slope of PPF = MRT = -dy dx x + y2 = 2x + 2y dy 100 to dx ay dy dx = -2x

x 4y dx :MRT = MRT = -|-$) = firms requires Profit max by MRT = x U(X,Y) = XY Do = mux= 25 y DU = moy = 25x MRS = mes = mes enero x mux MUY - utility max. requires mRs = px from (1) 8 (ii) PPF plet x² = 42 x²= ² in equ- of x2 + y2 =100 x²+x2=100 2x2 =100 x2=50 X = 550 y² = 50 y= 50