Asked by
Saumya Kumar (SUSBS Assistant Professor)
on Oct 14, 2024Verified
Charlie has a utility function U(xA, xB) xAxB, the price of apples is $1, and the price of bananas is $2.If Charlie's income were $200, how many units of bananas would he consume if he chose the bundle that maximized his utility subject to his budget constraint?
A) 25
B) 10
C) 100
D) 50
E) 150
Utility Function
A representation in economics of how consumers rank different bundles of goods based on the level of satisfaction or utility they provide.
Budget Constraint
An equation that represents all combinations of goods and services a consumer can afford, given their income and the prices of the goods.
Income
The financial gain earned or received over a period of time, typically through work, investments, or business ventures.
- Utilize the maximization of utility strategy to find the most advantageous consumption sets.
- Examine the repercussions of shifts in income levels on purchasing behaviors.
Verified Answer
CD
Learning Objectives
- Utilize the maximization of utility strategy to find the most advantageous consumption sets.
- Examine the repercussions of shifts in income levels on purchasing behaviors.