QUESTION 3Consider an individual who has a utility functionU(X,Y) = 2x1/2) + Y/2),the prices of goods X and Y are given by px = $8 and pY = $2, and the income level of consumer is I = $80.3-a) Write the consumer's utility maximization probiem (formally, as we wrote in the lectures).3-b) Write the Lagrangian function associated to the maximization problem.3-c) Write the first order conditions (FOC).3-d) Find the consumption bundle that maximizes consumer's utility.

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Answered: QUESTION 3 Consider an individual who…

QUESTION 3 Consider an individual who has a utility function U(X,Y) = 2x1/2)+ y(/2), the prices of goods X and Y are given by pX = $8 and pY = $2, and the income level of consumer is I= $80.

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Chapter1: Making Economics Decisions

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Concept explainers

Marginal Rate of Technical Substitution

MRTS reaches a manufacturer when a part of the product is lowered to sustain the manufacturing level when the other part is extended. It is the level of the quantity that is lowered when one extra volume is used, and the output is unchanged.

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Before understanding what is preference and utility analysis, it is very important to understand the terms preference and utility separately.

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