A consumer is maximising her utility function: U(r, y) = (105 + y0.5), subject to the budget constraint 4x + 2y = 108. (a) Set up the Lagrangian function of this utility maximisation problem and first-order conditions. (b) What are the utility maximizing amounts of x and y? Also, calculate the multiplier. (c) What are the utility maximising amounts of x and y if the budget constrain to + 2y 36? How would A change? Explain your reasoning. (Hint: Yc need to calculate A, rather comment on how it would change and why.) [

A consumer is maximising her utility function: U(r, y) = (105 + y0.5), subject to the budget constraint 4x + 2y = 108. (a) Set up the Lagrangian function of this utility maximisation problem and first-order conditions. (b) What are the utility maximizing amounts of x and y? Also, calculate the multiplier. (c) What are the utility maximising amounts of x and y if the budget constrain to + 2y 36? How would A change? Explain your reasoning. (Hint: Yc need to calculate A, rather comment on how it would change and why.) [

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter4: Utility Maximization And Choice

Section: Chapter Questions

Problem 4.3P

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