Question

) 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 the original consumption bundle.

d. Now that the price of good x has doubled, how much income is needed for the consumer to reach the original level of utility? Is this more or less that what you found in c.?

Answer 1

0 Given that A consumen's uit function price of 9 0 0 ane 5 +he consumerd income - $15o TO Find* o) Find 4he MRS Fon his consumen fon an aiven bundle C) anj Iiven Find the oAimal consumption bundle fo his consumen Suppose the Price of good . doubles conSurmen is able o punchase oiginal Co nSum ptio bundle

Now that the price of good has doubled o muc income is needed fon the oDSumero 4o roeach the oniginal level o less that cobat you -found n c. グ 31 +5 = 150 cubene, the consumern income-S 0 .,. 3싯 + 3.ox = 150 6x150

X= 150 6 15 c> when the pnice of good x doubles -.x become s 6 .. .: 6メ25 + 5x15 's) (we know that Χ:25 S F22 5 we Knoo 5 xd= 3150

2-315 1-2 X2 312-5 = 312.5 17-617 21.22 hequined: 17.677 (c)ts( ) ncome 2)-22 1060 6 2 + 106.1 二 212.1 Tncome equined 212.