Question: A consumer has a utility function equal to U = xy and an exogenous budget constraint equal to 20. Denote the prices of x

A consumer has a utility function equal to U = xy and an exogenous budget constraint equal to 20. Denote the prices of x and y as Px and Py, and let Px 1 and Py = 2. Write the Lagrangean that represents the consumer's optimization problem, using to denote the Lagrange multiplier. = (2 points) What is the intepretation of X? (4 points) Solve the consumer's utility maximization problem to find the optimal consumption of x and y. You must show your work.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

The consumers optimization problem can be represented by the Lagrangean as follows Lx y A xy A20 Px ... 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

Students Have Also Explored These Related Economics Questions!

What currency is most preferred by cybercriminals for ransom payments

Environmental Economics, EEP101/ECON125 Problem Set 1 James Sallee Spring 2024 Problem set 1 covers core concepts from module 1, as well as some review of optimization and mathematics. Part I....

1456HHSC attend all (a) In the quantum teleportation protocol, Alice and Bob are every in possession of one qubit of a couple in the joint country00i + statei. Explain how the protocol works. In...

Ronnie owns 600 shares of a stock mutual fund. This year he received dividend distributions of 60 stock mutual fund shares ($ 40 per share) and long term capital gain distributions of 45 stock mutual...

Why is it necessary to use a negative present value when solving for N (the number of payments) or I/Y (the rate of return)? Similarly, why does the answer have a negative sign if positive payments...

As a new controller, reply to this comment by a plant manager; As I see it, out accountants may be needed to keep records for shareholders and Uncle Sam, but I dont want them sticking their noses in...

6.90 Normal Temperatures In Exercise 1.68, Allen Shoemaker derived a distribution of human body temperatures, which has a distinct mound-shape. Suppose we assume that the temperatures of healthy...

Action Jackson Company acquired a new machine in order to expand its productive capacity. The costs associated with the machine purchase were as follows: Purchase price . . . . . . . . . . . . . . ....

An entrepreneur has a project that requires an initial investment 1. He/She has initial cash A; if A 0? (d) Show what happens to the minimum level of capital required to access financial markets if...

3. [Para. 5-b-3] A $290 purchase order for advertisements soliciting bids for the Springer Street Project was issued on January 2. The bill for advertising in the amount of $300 was received and a...

On January 1 , Year 1 , Marino Moving Company paid $ 4 8 , 0 0 0 cash to purchase a truck. The truck was expected to have a four year useful life and an $ 8 , 0 0 0 salvage value. If Marino uses the...

FE/EIT - Static analysis of a wheel (spool) pulled by a rope (See spool dynamics in Hw 15.5). The figure to the right shows a rigid body B consisting of an axle and wheel. One end of a thin...

LMN makes hand embroidered sweatshirts to customer specifications. The following detail is available from the company's budget: Cost centre Overheads (RM) Activity Cutting and sewing 93,000 37,200...

ME296V HW1 Only neat individual work Prob.1 Find the steady state error value for G(s) = s+1 s+s+1 with a ramp input (10 pts) Prob.2 Find the open loop error transfer function for G(s) given in...

Gator Inc. reported taxable income of $1,550,000 this year and paid federal income taxes of $325,500. Included in the company's computation of taxable income is gain from the sale of a depreciable...

Projected benefit obligation, 1/1/25 (before amendment) Plan assets, 1/1/25 Pension liability, 1/1/25 On January 1, 2025, Sheridan Corp., through plan amendment, grants prior service benefits having...

Bobbie Singh provides writing services for small businesses. He blogs for companies that need professionally written content. His business records at November 15, 2023, are shown below: During the...

Can a game have a Nash equilibrium even though neither player has a dominant strategy? Can a game have a Nash equilibrium even though neither player has a dominated strategy?

The market demand for gadgets is given by Pd = 120 - Q, where Q is the quantity consumers demand when the price that consumers pay is Pd. Gadgets are competitively supplied according to the inverse...

Consider the production function Q = K + L. For this production function, MPL = 1/(2L) and MPK = 1. Derive the input demand curves for L and K, as a function of the input prices w (price of labor...

The report Undergraduate Students and Credit Cards in 2004: An Analysis of Usage Rates and Trends (Nellie Mae, May 2005) estimated that 21% of undergraduates with credit cards pay them off each month...

The article High Levels of Mercury Are Found in Californians (Los Angeles Times, Feb ru ary 9, 2006) describes a study in which hair samples were tested for mercury. The hair samples were obtained...

Whether or not to continue a Mardi Gras Parade through downtown San Luis Obispo, CA, is a hotly debated topic. The parade is popular with students and many residents, but some celebrations have led...