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Jeramis utility function is given by U(x1,x2) = 2x1 +2X2. What is his demand for each good if P1 = 4,P2 =6, and m=60? x1 = 6
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Answer #1

x1= 15, x2= 0 ------- is correct

Utility function shows that both goods are substitutes. Thus only one of them will be consumed.

MU1 = dU/dx1= 2

MU2= dU/dx2= 2

MRS = 2/2= 1

P1/P2= 4/6 =0.67

Since MRS > P1/P2, x1 will be consumed.

x1= 60/4= 15

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