An individual’s utility is expressed by the function u(x,y) = xy

The person’s income is ten dollars (I = $10)

The price of item x is $1. The price of item y is $1.

Maximize this consumer’s utility subject to a budget constraint using the Lagrange Multiplier method.

At what point does the marginal rate of substitution equal the price ratio?

Answer rating: 100% (QA)

Maximizing Utility with Lagrange Multipliers Step 1 Set up the Lagrangian Our goal is to maximize th... View the full answer