Question: 2. You have the following utility function: U = 2X + 4Y, where X and Y are two goods. Draw this utility function for U

2. You have the following utility function: U = 2X + 4Y, where X and Y are two goods.

  1. Draw this utility function for U = 150. Make sure that you label the axes (what is represented on each axis) and indicate the values of the X and Y intercepts (the points where the utility function touches the axes).

  1. What is the marginal rate of substitution between good X and good Y (that is, the number of units of good Y you are willing to give up for 1 additional unit of good X)? Explain.

  1. What is the relation between good X and good Y, that is, are they perfect substitutes, perfect complements, or neither? Explain.

  1. Assume that the price of good X is $4 per unit and the price of Y is $5 per unit. Your weekly income is $200. How would you allocate your income in order to maximize utility? Explain why your allocation would be utility-maximizing (that is, no other allocation would yield a higher utility level) and show the value of this maximized utility level.

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