Question: Assume a consumer with the utility function U = U (X, Y) = (X + 2)(Y + 1) and the budget constraint (M = 95,

Assume a consumer with the utility function

U = U (X, Y) = (X + 2)(Y + 1)

and the budget constraint (M = 95, Px = 10, and Py = 5):

95 = 10X 15Y

a. Set up the constrained maximization problem, and derive the first-order conditions.

b. Find the amounts of goods X and Y the consumer will purchase in equilibrium.


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