Suppose the utility function is represented by the following equation: U (X, Y) = XY + X + 2Y + 2 and the budget constraint (I = PxX + PyY) is represented by (I = 95; PX = 10 and PY = 5): 95 = 10X + 5Y a. Determine the optimal quantity to buy of X and Z subject to the budget constraint. b. What is the total profit under the optimal combination? c. By how much will total profit increase if income increases by one dollar?

Suppose the utility function is represented by the following equation: U (X, Y) = XY + X + 2Y + 2 and the budget constraint (I = PxX + PyY) is represented by (I = 95; PX = 10 and PY = 5): 95 = 10X + 5Y a. Determine the optimal quantity to buy of X and Z subject to the budget constraint. b. What is the total profit under the optimal combination? c. By how much will total profit increase if income increases by one dollar?

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter6: Consumer Choice Theory

Section: Chapter Questions

Problem 1SQ

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