Imran consumes two goods, X1 and X2. his utility function takes the form: u(X1, X2)= 4(X1)^3+3(X2)^5. The price of X1 is Rs. 2 and the price of X2 is Rs. 4. Imran has allocated Rs. 1000 for the consumption of these two goods. (a) Fine the optimal bundle of these two goods that Imran would consume if he wants to maximize his utility. Note: write bundles in integers instead of decimals. (b) What is Imran's expenditure on X1? On X2? (c) Do you find more than one bundle satisfying the first order conditions? Why?
Imran consumes two goods, X1 and X2. his utility function takes the form: u(X1, X2)= 4(X1)^3+3(X2)^5. The price of X1 is Rs. 2 and the price of X2 is Rs. 4. Imran has allocated Rs. 1000 for the consumption of these two goods. (a) Fine the optimal bundle of these two goods that Imran would consume if he wants to maximize his utility. Note: write bundles in integers instead of decimals. (b) What is Imran's expenditure on X1? On X2? (c) Do you find more than one bundle satisfying the first order conditions? Why?
Chapter7: Consumer Choice: Maximizing Utility And Behavioral Economics
Section: Chapter Questions
Problem 6QP
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Imran consumes two goods, X1 and X2. his utility function takes the form: u(X1, X2)= 4(X1)^3+3(X2)^5. The price of X1 is Rs. 2 and the price of X2 is Rs. 4. Imran has allocated Rs. 1000 for the consumption of these two goods.
(a) Fine the optimal bundle of these two goods that Imran would consume if he wants to maximize his utility. Note: write bundles in integers instead of decimals.
(b) What is Imran's expenditure on X1? On X2?
(c) Do you find more than one bundle satisfying the first order conditions? Why?
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