# Donna and Jim are two consumers purchasing strawberries and chocolate. Jim’s utility function is ?(?,?) = ?? and Donna’s utility function is ?(?,?) = ?2? where x is strawberries and y is chocolate. Jim’s marginal utility functions are MUx=y and MUy=x while Donna’s are MUx=2xy and MUy=x2. Jim’s income is \$100, andDonna’s income is \$150.What is the optimal bundle for Donna if the price of strawberries is \$2 and the price of chocolate is \$4?

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Donna and Jim are two consumers purchasing strawberries and chocolate. Jim’s utility function is ?(?,?) = ?? and Donna’s utility function is ?(?,?) = ?2? where is strawberries and is chocolate. Jim’s marginal utility functions are MUx=y and MUy=x while Donna’s are MUx=2xy and MUy=x2Jim’s income is \$100, andDonna’s income is \$150.

• What is the optimal bundle for Donna if the price of strawberries is \$2 and the price of chocolate is \$4?
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Step 1

To get optimal bundle, one has to equate slope of indiffernce curve to slope of budget line.

Step 2

Income = Px . X + Py . Y

150 = 2 X + 4 Y   or

75 = X + 2 Y

This is the budget line equation.

we can substitute X = 4Y in budget line equation to o...

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