Elif has a utility function u(x, y) = 4x/2 + 2y/2, answer the following questions. (a)...

 

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Elif has a utility function u(x, y) = 4x¹/2 + 2y¹/2, answer the following questions. (a) Consider that the price of x is 60 TL. the price of y is 30 TL and monthly income is "M" TL. Elif uses all of her income each month to purchase x and y. Solve the constraint optimization problem and find the expressions for x and y*. (b) Confirm the second order condition for the maximization for part (a) using bordered Hessian Matrix. (c) Find the value function, given x* and y*. (d) Suppose that her income has increased by one unit. How does the optimized value of u(x, y) change? Answer by using Envelope Theorem. Interpret the found value. Elif has a utility function u(x, y) = 4x¹/2 + 2y¹/2, answer the following questions. (a) Consider that the price of x is 60 TL. the price of y is 30 TL and monthly income is "M" TL. Elif uses all of her income each month to purchase x and y. Solve the constraint optimization problem and find the expressions for x and y*. (b) Confirm the second order condition for the maximization for part (a) using bordered Hessian Matrix. (c) Find the value function, given x* and y*. (d) Suppose that her income has increased by one unit. How does the optimized value of u(x, y) change? Answer by using Envelope Theorem. Interpret the found value.

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a To solve the problem of maximizing utility we aim to maximize the function ux y 4x12 2y12 given the constraint that the monthly income M is allocate... View the full answer