Using the method of indifference curves and implicit differentiation, solve the following problem Optimise (maximise) the utility function: U=Xxy with prices for each good Px 20, Py 10 and a total budget of $200

Using the method of indifference curves and implicit differentiation, solve the following problem Optimise (maximise) the utility function: U=Xxy with prices for each good Px 20, Py 10 and a total budget of $200

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter6: Consumer Choice And Demand

Section: Chapter Questions

Problem 1.3P

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Concept explainers

Form Utility

The term utility in general refers to the satisfaction earned from usage of a particular product or service. Utility always plays an important role because it influences various important elements like demand & thereby the price of the good or service as well. Though utility is not easy to measure, various types of economic models can be used indirectly. There can be various types of utilities like economic utility, marginal utility, cardinal utility, form utility.

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Step 1: Determine the given information:

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Step 2: Determine the slope of indifference curve using implict differenciation:

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Step 3: Determine maximium utility:

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