Homework Answers
2. The table can be completed as below.
| X | Y | MUx | MUy | MUx/Px | MUy/Py |
| 16 | 9.6 | 0.4 |  |
 |
0.15 |
| 20 | 8 |  |
0.8 | 0.16 |  |
| 22 | 8.8 | 0.32 |  |
 |
0.16 |
The budget constraint is given as 
, meaning that Px is 2 and Py is 5.
(a) Bundle (16,9.6) is not an optimal bundle as MUx/Px is not equal to, and is greater than MUy/Py. For a constant price, MUx can be decreased by increasing consumption of X, and MUy can be increased by decreasing the consumption of y to be at a parity and the optimal bundle.
(b) Bundle (20,8) is an optimal bundle, as MUx/Px is indeed equal to MUy/Py. There is no reason for the consumer to decrease or increase any of the consumption, as it would break the parity.
(c) Bundle (22,8.8) is an optimal bundle, as MUx/Px is again equal to MUy/Py. There is no reason for the consumer to decrease or increase any of the consumption, as it would break the parity.
2. The table can be completed as below.
| X | Y | MUx | MUy | MUx/Px | MUy/Py |
| 16 | 9.6 | 0.4 |  |
 |
0.15 |
| 20 | 8 |  |
0.8 | 0.16 |  |
| 22 | 8.8 | 0.32 |  |
 |
0.16 |
The budget constraint is given as 
, meaning that Px is 2 and Py is 5.
(a) Bundle (16,9.6) is not an optimal bundle as MUx/Px is not equal to, and is greater than MUy/Py. For a constant price, MUx can be decreased by increasing consumption of X, and MUy can be increased by decreasing the consumption of y to be at a parity and the optimal bundle.
(b) Bundle (20,8) is an optimal bundle, as MUx/Px is indeed equal to MUy/Py. There is no reason for the consumer to decrease or increase any of the consumption, as it would break the parity.
(c) Bundle (22,8.8) is an optimal bundle, as MUx/Px is again equal to MUy/Py. There is no reason for the consumer to decrease or increase any of the consumption, as it would break the parity.
2. The table can be completed as below.
| X | Y | MUx | MUy | MUx/Px | MUy/Py |
| 16 | 9.6 | 0.4 |  |
 |
0.15 |
| 20 | 8 |  |
0.8 | 0.16 |  |
| 22 | 8.8 | 0.32 |  |
 |
0.16 |
The budget constraint is given as 
, meaning that Px is 2 and Py is 5.
(a) Bundle (16,9.6) is not an optimal bundle as MUx/Px is not equal to, and is greater than MUy/Py. For a constant price, MUx can be decreased by increasing consumption of X, and MUy can be increased by decreasing the consumption of y to be at a parity and the optimal bundle.
(b) Bundle (20,8) is an optimal bundle, as MUx/Px is indeed equal to MUy/Py. There is no reason for the consumer to decrease or increase any of the consumption, as it would break the parity.
(c) Bundle (22,8.8) is an optimal bundle, as MUx/Px is again equal to MUy/Py. There is no reason for the consumer to decrease or increase any of the consumption, as it would break the parity.
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