Question

Your utility function over the goods X and Z takes the following form: You want to maximize your utility subject to your budget constraint. Assume that the price of X is $3 per unit and the price of Z is $6 per unit, and that the total income you have to spend on X and Z is $720. The consumption bundle that will maximize your utility subject to your budget constraint is X 240 and Z 0 (enter only numbers in the blanks, and please round to the nearest integer if necessary). Hint: First solve for the marginal rate of substitution (MRS). Setting that equal to the negative price ratio will give you an optimal ratio of X and Z to consume, which you can use in combination with the budget constraint to determine the exact optimal quantities of X and Z to consume.

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