Donna and Jim are two consumers purchasing strawberries and chocolates. Jim’s utility function is U (x, y) = XY, and Donna’s utility function is U (x, y) = x2y where x denotes strawberries and y denotes chocolates. Jim’s marginal utility functions are MUX=y and MUy=x while Donna’s are MUX=2xy and MUy=x2 . Jim’s income is $100, and Donna’s income is $150. What is the optimal bundle for Donna if the price of strawberries is $2 and the price of chocolate is $4? What is the optimal bundle for Jim, and for Donna, when the price of strawberries rises to
$3?

Answer rating: 100% (QA)

Ans p x price of strawberry p y price of chocolate I income Ixp x ... View the full answer