Kari requests two goods: X and Y. The utility function is given by: U(XY)=X-Y. Prices of X and Y is Px and Py, and budget is of m dollars. A) Set up the budget constraint and draw the budget line in an x-y diagram. B) Whats the expression for the slope in the budget line? C) Show the condition for optimal fit using Lagranges method D) Show the optimal fit graphically and relate the figure to task C

Microeconomics
13th Edition
ISBN:9781337617406
Author:Roger A. Arnold
Publisher:Roger A. Arnold
Chapter7: Consumer Choice: Maximizing Utility And Behavioral Economics
Section: Chapter Questions
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Kari requests two goods: X and Y.

The utility function is given by: U(XY)=X-Y. Prices of X and Y is Px and Py, and budget is of m dollars.

A) Set up the budget constraint and draw the budget line in an x-y diagram.

B) Whats the expression for the slope in the budget line?

C) Show the condition for optimal fit using Lagranges method

D) Show the optimal fit graphically and relate the figure to task C

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