Question: Sharon has the following utility function: U(X,Y) = X + Y Where X is her consumption of candy bars, with price PX = $1, and

Sharon has the following utility function: U(X,Y) = √X +√ Y Where X is her consumption of candy bars, with price PX = $1, and Y is her consumption of espressos, with PY = $3.
a) Derive Sharon’s demand for candy bars and espressos.
b) Assume that her income I = $100. How many candy bars and how many espressos will Sharon consume?
c) What is the marginal utility of income?

Step by Step Solution

★★★★★

3.46 Rating (162 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

a Using the Lagrangian method the Lagrangian equation is f X Y l P X X P Y Y I To find the demand fu... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

701-B-E-M-E (5478).docx

120 KBs Word File

Students Have Also Explored These Related Economics Questions!

Maurice has the following utility function: U(X, Y) = 20X + 80Y X2 2Y2 Where X is his consumption of CDs, with a price of $1, and Y is his consumption of movie videos, with a rental price of $2. He...

Remember Shirley Sixpack and Lorraine Quiche from the last chapter? Shirley thinks a 16-ounce can of beer is just as good as two 8-ounce cans. Lorraine only drinks 8 ounces at a time and hates stale...

A: Suppose that all firms in the fast food restaurant business face U-shaped average cost curves prior to the introduction of a recurring license fee. The only output they produce is hamburgers....

Sharon has the following utility function: U(X, Y) = VX + VY where X is her consumption of candy bars, with price Px = $1.00, and Y is her consumption of espressos, with Py = $4.00. Derive Sharon's...

Suppose that a consumer has the following utility function, u (x, y) = 3x ^ 2y ^ 3 that describes his consumption preferences. This individual wants to formulate a consumption plan for two goods x...

UNIVERSITY OF WISCONSIN-MADISON DEPARTMENT OF ECONOMICS ECONOMICS 301 - 002 FALL 2021 Problem Set #2 (to be submitted online by 11:59 p.m. CDT Friday, October 15) 1 . A utility maximizing consumer...

1. Sharon has the following utility function: U(X, T ) - ax + dV. where X is her consumption of candy bars, with price Py=$1, and Y is her consumption of espressos, with P=$3. (a) Derive Sharon's...

b. Derive an expression for this consumer's income consumption curve. Derive an expression for this consumer's price consumption curve for PX . Comment on their similaIities or differences. i. This...

3. (26 points) Joe has the following utility function: Q'X, Y) = 3J3? + J} , where X is his consumption of candy bars, with Px = $1, and Y is coffee, with Py = $2. (a) (8 points) Assume that his...

UNIVERSITY OF WISCONSIN-MADISON DEPARTMENT OF ECONOMICS ECONOMICS 301 - 002 FALL 2021 Problem Set #2 (to be submitted online by 11:59 p.m. CDT Friday, October 15) 1 . A utility maximizing consumer...

What steps should an auditor take to help identify fraud risk factors?

Blue Spruce Limited, a private company following ASPE, uses a perpetual inventory systemOn July 1, Blue purchased $62,000 of inventory, terms 2/10, n/30, FOB shipping point. Blue paid freight costs...

Which type of bond is considered the "risk free asset"? Municipal Corporate Treasury Money Market

Explain the signifi cance of the fact that companies are increasingly engaging in share buy-backs.

1. The latest trade round is called the_________ round. 2. The _________ was formed in 1995 to oversee GATT. 3. NAFTA is a free-trade agreement between the United States, Mexico, and _____________....

You are exploring starting a rental company that rents higher-end motorcycles. You suspect that your service would be of more interest to condo-dwellers than to people who live in houses, because...

Ruby is 25 and has a good job at a biotechnology company. She currently has $12,400 in an IRA, an important part of her retirement nest egg. She believes her IRA will grow at an annual rate of 8...

Benchmark - Company Financial Analysis Project The purpose of this assignment is to analyze an annual Securities and Exchange Commission (SEC) report and perform research in order to evaluate the...