Suppose Mia's utility function on lemon soda (X) and chips (Y) is given by U(X,Y) = X0.5Y0.5 She has $80 per month to spend on lemon soda (X) and chips (Y). The prices of lemon soda (PX) and chips (PY) are $2 and $4 respectively.a. Solve for her optimal consumption bundle of lemon soda (X*) and chips (Y*)? i. Optimal Consumption in lemon soda (X*) : ii. Optimal Consumption in chips (Y*) : b. Suppose the price of lemon soda (X) increases to $8, what is the new optimal bundle? i. Optimal Consumption in lemon soda (X*) : ii. Optimal Consumption in chips (Y*) :
Suppose Mia's utility function on lemon soda (X) and chips (Y) is given by U(X,Y) = X0.5Y0.5 She has $80 per month to spend on lemon soda (X) and chips (Y). The prices of lemon soda (PX) and chips (PY) are $2 and $4 respectively.a. Solve for her optimal consumption bundle of lemon soda (X*) and chips (Y*)? i. Optimal Consumption in lemon soda (X*) : ii. Optimal Consumption in chips (Y*) : b. Suppose the price of lemon soda (X) increases to $8, what is the new optimal bundle? i. Optimal Consumption in lemon soda (X*) : ii. Optimal Consumption in chips (Y*) :
Chapter10: Consumer Choice Theory
Section: Chapter Questions
Problem 6P
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Question
Suppose Mia's utility function on lemon soda (X) and chips (Y) is given by U(X,Y) = X0.5Y0.5
- She has $80 per month to spend on lemon soda (X) and chips (Y).
- The prices of lemon soda (PX) and chips (PY) are $2 and $4 respectively.
a. Solve for her optimal consumption bundle of lemon soda (X*) and chips (Y*)?
i. Optimal Consumption in lemon soda (X*) :
ii. Optimal Consumption in chips (Y*) :
b. Suppose the price of lemon soda (X) increases to $8, what is the new optimal bundle?
i. Optimal Consumption in lemon soda (X*) :
ii. Optimal Consumption in chips (Y*) :
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