Suppose Mika has budget of $600 for only two goods, x and y. The price of a Good X is $10 and the price of good Y is $25. Mika's utility function for Good x and Good y is: U(x, y) = 2xy. Suppose the price of a Good X increases to $15. a. What is Mika's initial basket when the price of a Good X is $10? b. How much utility does this basket generate for Mika? c. What is Mika's final consumption basket when the price of Good X increases to $15?

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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Suppose Mika has budget of $600 for only two goods, x and y. The price of a Good X is $10 and the price
of good Y is $25. Mika's utility function for Good x and Good y is: U(x, y) = 2xy. Suppose the price of a
Good X increases to $15.
a. What is Mika's initial basket when the price of a Good X is $10?
b. How much utility does this basket generate for Mika?
c. What is Mika's final consumption basket when the price of Good X increases to $15?
Transcribed Image Text:Suppose Mika has budget of $600 for only two goods, x and y. The price of a Good X is $10 and the price of good Y is $25. Mika's utility function for Good x and Good y is: U(x, y) = 2xy. Suppose the price of a Good X increases to $15. a. What is Mika's initial basket when the price of a Good X is $10? b. How much utility does this basket generate for Mika? c. What is Mika's final consumption basket when the price of Good X increases to $15?
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