Question #4 Mary's preferences over X and Y correspond to the following utility function: U(X,Y) = XY3. Suppose that her income is M=$80 and that the market price of X is Px-$2, while that of Y is Py=$4 a) Find and plot her budget line, clearly indicating the intercepts and the slope. b) The marginal utility of X is MUx=Y³, while that of Y is MUy=3XY². Compute and show Mary's optimal consumption bundle on the same graph. c) Find her utility at her optimal consumption bundle, specifying the amount of satisfaction she derives from the last unit of each good purchased.

Question #4 Mary's preferences over X and Y correspond to the following utility function: U(X,Y) = XY3. Suppose that her income is M=$80 and that the market price of X is Px-$2, while that of Y is Py=$4 a) Find and plot her budget line, clearly indicating the intercepts and the slope. b) The marginal utility of X is MUx=Y³, while that of Y is MUy=3XY². Compute and show Mary's optimal consumption bundle on the same graph. c) Find her utility at her optimal consumption bundle, specifying the amount of satisfaction she derives from the last unit of each good purchased.

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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