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Consider a consumer whose preferences are represented by U(x,y) = x^0.75y^0.25. The consumer has an incomeof I=360 and the prices of the two goods he cares about are given by px =1 and py =2.
(a) Write down the consumerâs utility maximization problem.
(b) Find the consumerâs optimal consumption bundle.
(c) What fraction of her income does the consumer spend on good x and on y?
(d) Using your result from part b, show that the optimal consumption bundle is unchanged if px, py and I are simultaneously doubled. How do we call this situation?
Consider a consumer whose preferences are represented by U(x,y) = x^0.75y^0.25. The consumer has an incomeof I=360 and the prices of the two goods he cares about are given by px =1 and py =2.
(a) Write down the consumerâs utility maximization problem.
(b) Find the consumerâs optimal consumption bundle.
(c) What fraction of her income does the consumer spend on good x and on y?
(d) Using your result from part b, show that the optimal consumption bundle is unchanged if px, py and I are simultaneously doubled. How do we call this situation?
tayyabh1010Lv2
19 Jun 2023
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