X, Y) = 3XY². The current market price for X is $10, while the market price for Y is $5. Ily's current income is $500. Write the expression for Sally's budget constraint. Graph the budget constraint and determine its -pe. Determine the X", Y* combination which maximizes Sally's utility, given her budget constraint. ow her optimum point on a graph. (Partial units for the two quantities are possible.)

Microeconomics A Contemporary Intro
10th Edition
ISBN:9781285635101
Author:MCEACHERN
Publisher:MCEACHERN
Chapter6: Consumer Choice And Demand
Section: Chapter Questions
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Sally consumes two goods, X and Y. Her utility function is given by the expression
U(X, Y) = 3XY2. The current market price for X is $10, while the market price for Y is $5.
Sally's current income is $500.
a. Write the expression for Sally's budget constraint. Graph the budget constraint and determine its
slope.
b. Determine the X', Y’ combination which maximizes Sally's utility, given her budget constraint.
Show her optimum point on a graph. (Partial units for the two quantities are possible.)
c. Calculate the impact on Sally's optimum market basket of an increase in the price of X to $15.
What would happen to her utility as a result of the price increase? Be specific.
Transcribed Image Text:Sally consumes two goods, X and Y. Her utility function is given by the expression U(X, Y) = 3XY2. The current market price for X is $10, while the market price for Y is $5. Sally's current income is $500. a. Write the expression for Sally's budget constraint. Graph the budget constraint and determine its slope. b. Determine the X', Y’ combination which maximizes Sally's utility, given her budget constraint. Show her optimum point on a graph. (Partial units for the two quantities are possible.) c. Calculate the impact on Sally's optimum market basket of an increase in the price of X to $15. What would happen to her utility as a result of the price increase? Be specific.
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