(b) A consumer has $280 to spend on two commodities, the first of which costs $2 per unit and the second $5 per unit. Suppose that the utility derived by the consumer from x units of the first commodity and y units of the second is given by U(x,y) = 100x0.25y0.75 How many units of each commodity should the consumer buy to maximize utility? Compute the Lagrange multiplier a and interpret in economic terms.

(b) A consumer has $280 to spend on two commodities, the first of which costs $2 per unit and the second $5 per unit. Suppose that the utility derived by the consumer from x units of the first commodity and y units of the second is given by U(x,y) = 100x0.25y0.75 How many units of each commodity should the consumer buy to maximize utility? Compute the Lagrange multiplier a and interpret in economic terms.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter4: Utility Maximization And Choice

Section: Chapter Questions

Problem 4.2P

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