Question: A consumer has GH600 to spend on two commodities, A and B. Commodity A costs GH20 per unit and Commodity B costs GH30 per unit.

A consumer has GH600 to spend on two commodities, A and B. Commodity A costs GH20 per unit and Commodity B costs GH30 per unit. Suppose that the utility derived by the consumer from x units of Commodity A, and y Commodity B is given by the Cobb-Douglas utility function

U (x, y) = 10x0.6y0.4

a. How many units of each commodity should the consumer buy to maximize utility?

b. Is the budget constraint binding?

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