Consider the Cobb-Douglas utility function of a consumer is given as u (z y) := 1"y where a > b and the sum(a, b) and the product(a, b) are 1 and 2/9 respectively, find a. the budget needed, m, to be able to afford the desired utility number u if price of good r and y are p, and py respectively. b. Given that p, = 2.00, py = 3.00 and m = 150, what is the optimal bundle available to the consumer? c. Given that the price of commodity y increases by 20%, what becomes the new optimal bundle available to the consumer

Consider the Cobb-Douglas utility function of a consumer is given as u (z y) := 1"y where a > b and the sum(a, b) and the product(a, b) are 1 and 2/9 respectively, find a. the budget needed, m, to be able to afford the desired utility number u if price of good r and y are p, and py respectively. b. Given that p, = 2.00, py = 3.00 and m = 150, what is the optimal bundle available to the consumer? c. Given that the price of commodity y increases by 20%, what becomes the new optimal bundle available to the consumer

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter10: Consumer Choice Theory

Section: Chapter Questions

Problem 6P

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