Given the utility function U = 10X1.5Y0.5, a. show and discuss if the individual is experience diminishing marginal utility. b. calculate the MRSXY and interpret your computed value. Would you say that this individual prefers more balanced bundles over extremes? Support your claim. c. and suppose prices of goods PX = 10, PY = 5, and income I = 400, solve for the optimal levels of X, Y, and U using the Lagrange Multiplier Method and graphically illustrate the resulting substitution, income, and net effects if the price of good Y is doubled, cet. par.

Given the utility function U = 10X1.5Y0.5, a. show and discuss if the individual is experience diminishing marginal utility. b. calculate the MRSXY and interpret your computed value. Would you say that this individual prefers more balanced bundles over extremes? Support your claim. c. and suppose prices of goods PX = 10, PY = 5, and income I = 400, solve for the optimal levels of X, Y, and U using the Lagrange Multiplier Method and graphically illustrate the resulting substitution, income, and net effects if the price of good Y is doubled, cet. par.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter4: Utility Maximization And Choice

Section: Chapter Questions

Problem 4.11P

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