1. Consider an individual who consumes two goods, x and y. Her utility function is U(x, y) = x¹/³y2/3 The prices of the goods are p₁ = Py = 1. She has a gift certificate worth $40 and an income of I = $50. (i) (Unrestricted) Suppose the gift certificate is unrestricted so it can be spent on either or y or both. What is her optimal bundle?
1. Consider an individual who consumes two goods, x and y. Her utility function is U(x, y) = x¹/³y2/3 The prices of the goods are p₁ = Py = 1. She has a gift certificate worth $40 and an income of I = $50. (i) (Unrestricted) Suppose the gift certificate is unrestricted so it can be spent on either or y or both. What is her optimal bundle?
Chapter3: Preferences And Utility
Section: Chapter Questions
Problem 3.2P
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Only part (ii) please, thank you!
![1. Consider an individual who consumes two goods, x and y. Her utility function is
U (x, y) = x¹/³y²/3
The prices of the goods are pr = Py = 1. She has a gift certificate worth $40 and an
income of I= $50.
(i) (Unrestricted) Suppose the gift certificate is unrestricted so it can be spent on
either x or y or both. What is her optimal bundle?
(ii) (Restricted) Now find her utility-maximizing bundle if the gift certificate is
restricted to be spent on only good r. [Think carefully. Take into account what
she spends on x in (a), unrestricted case]](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc3585354-64d7-4f4a-b055-4a9b75b3799d%2F287b4c3b-fce8-46b1-bb10-443a7f7d0ebb%2Fps630j8_processed.png&w=3840&q=75)
Transcribed Image Text:1. Consider an individual who consumes two goods, x and y. Her utility function is
U (x, y) = x¹/³y²/3
The prices of the goods are pr = Py = 1. She has a gift certificate worth $40 and an
income of I= $50.
(i) (Unrestricted) Suppose the gift certificate is unrestricted so it can be spent on
either x or y or both. What is her optimal bundle?
(ii) (Restricted) Now find her utility-maximizing bundle if the gift certificate is
restricted to be spent on only good r. [Think carefully. Take into account what
she spends on x in (a), unrestricted case]
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