Question: 3. (25 points) A consumer's preferences between goods 1 and 2 are represented by the utility function u(x1, x2) = x1x2, where x1 denotes the

3. (25 points) A consumer's preferences between goods 1 and 2 are represented by the utility function u(x1, x2) = x1x2, where x1 denotes the quantity consumed of good 1 and x2 denotes the quantity consumed of good 2. Suppose that this consumer's income is $16 and the prices are given by p1 = $1 for good 1 and p2 = $2 for good 2. Find the optimal consumption bundle for this consumer. Represent his optimal choice with a graph.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

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

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!

2. (20 points) Suppose a consumer's preferences between goods 1 and 2 are represented by the utility function u(x1, x2) = x1x2. As this consumer substitutes good 1 for good 2 while keeping her...

1 - Optimal demand and price changes (41 points) Let Zoe's preferences over consumption bundles x = (x1, x2) be represented by the utility function u (x1, x2) = x1x2. Zoe has income m = 24. The price...

Question 4 11 Marks {0.5, 0.5, 2. 5. 3) A consumer has the following utility function U (x1. x2) = x1{x2+ 4) Prices of the two goods X1 and x2 respectively are p. and p2 and the consumer has income...

Question4 11 Marks (0.5, 0.5, 2, 5, 3) A consumer has the following utility function U (X1. X2) = X1(X2 + 4} Prices of the two goods X1 and X2 respectiver are p1 and p2 and the consumer has income m....

A consumer has the following utility function U (x 1 , x 2 ) = x 1 (x 2 + 4) Prices of the two goods x 1 and x 2 respectively are p 1 and p 2 and the consumer has income m. We assume that all prices...

Question 4 11 Marks (0.5, 0.5, 2, 5, 3) A consumer has the following utility function U (X1, X2) = X1(X2 + 4) Prices of the two goods x1 and x2 respectively are p1 and p2 and the consumer has income...

A consumer has the following utility function U (X1, X2) = X1(X2+ 4) Prices of the two goods x, and x, respectively are p, and p: and the consumer has income m. We assume that all prices and income...

Task 1 We consider an individual facing the prices p1 and p2 on the two items x1 and x2. We let m be the consumer's income. a) Derive the individual's budget curve, and illustrate this in a diagram....

Hi there, didn't receive feedback for these questions from a problem set I was given. I'm struggling to see how to answer them. 15)A consumer's preferences over bundles of goods x, and x2 (with...

1. Prices perform a rationing function by A. Allocating goods to the buyers who are willing and able to pay the highest price. B. Eliminating scarcity in the market. C. Making sure that buyers do not...

Read the novel The Strange Case of Dr. Jekyll and Mr. Hyde and Answer the following question 1. Explain a character's problem and then offer your character advice on how to solve his/her problem. 2....

In the United States, which governing body establishes U . S . GAAP? a . GASB b . SEC c . FASB d . IASB

City government officials are analyzing a complicated financial transaction. A GASB Implementation Guide seems to provide one reporting answer and a GASB Concepts Statement seems to provide a...

Western University has only one womens softball scholarship remaining for the coming year. The final two players that Western is considering are Allison Fealey and Emily Janson. The coaching staff...

The table that follows shows the stock price, earnings per share, and dividends per share for three companies for a recent year: a. Determine the price-earnings ratio and dividend yield for the three...

The shareholders' equity of ILP Industries includes the items shown below. The board of directors of ILP declared cash dividends of $8 million, $20 million, and $150 million in its first three years...

What are the assumptions underlying common queuing models?

Write a program to wish happy birthday to a student. Firstly, take today month and day as an input and secondly take birthday as an input in the form of month and day. If the input day and month...

2. In this chapter, the reader should reflect on the following concepts: Message, communication error, data, code, information, metaphor.

1. To gain insight about the information processes operating in a communication process.

4. As your starting point, take two everyday decisions you have made during the past year. Discuss these decisions based on the following question: Why do you think your decisions may have been wrong?