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13 Dec 2019
Question: 4. Consider a consumer who has utility function u(x, y) = min{2x, 3y} where x, y are amounts of goods X, Y consumed respectively.
(a) If px = 1, py = 1, consumer has total budget w = 10. Whatâs the optimal consumption bundle of this consumer? Explain in detail, using either graph or algebra to justify your answer.
(b) If there is an inflation which doubled the prices px, py as well as the wealth w. Consumer preference is still the same as before. What will be the consumerâs optimal consumption bundle in this case? Explain your answer clearly.
Question: 4. Consider a consumer who has utility function u(x, y) = min{2x, 3y} where x, y are amounts of goods X, Y consumed respectively.
(a) If px = 1, py = 1, consumer has total budget w = 10. Whatâs the optimal consumption bundle of this consumer? Explain in detail, using either graph or algebra to justify your answer.
(b) If there is an inflation which doubled the prices px, py as well as the wealth w. Consumer preference is still the same as before. What will be the consumerâs optimal consumption bundle in this case? Explain your answer clearly.
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Sixta KovacekLv2
17 Dec 2019
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