Calculate adams utility at his optimal consumption

Reference no: EM133706653

Question: Assume that Adam's utility from consuming good X and good Y is given by the following function: U = 4X 0.8Y 0.2 Where X is the quantity of good X while Y is the quantity of good Y. Assume the price of X (PX) is £45, the price of Y (PY) is £15, and he has a budget of £2250 to spend on the two goods.

a. Using the Lagrange multiplier, calculate Adam's optimal consumption bundle (You must clearly show all working and explain the economic intuition to receive the marks for this question).

b. Calculate Adam's utility at his optimal consumption bundle (You must clearly show all working and explain the economic intuition to receive the marks for this question).

c. Calculate ? at Adam's optimal consumption bundle and provide an economic interpretation of its value (You must clearly show all working and explain the economic intuition to receive the marks for this question).

d. Illustrate your answers to all the previous parts to this question on a clearly drawn and labelled indifference curve diagram. In particular, illustrate and explain: - The intercepts and slope of the budget constraint - The optimum consumption combination. - The optimal quantity of both goods. - The level of utility at the optimum consumption bundle

Reference no: EM133706653

Questions Cloud

How do these concepts impact interprofessional collaboration : Choose at least two leadership concepts that are important to embrace when working with other healthcare providers.

History of peripheral vascular disease : A practitioner's is seeing a 64 year old patient with a history of peripheral vascular disease and with an ischemic left lateral ankle wound.

Describe the steps taken to prevent mri induced injuries : Describe the steps taken to prevent MRI induced injuries.

How many different segments are targeting with your product : How many different segments are you targeting with present product offerings? Describe each segment's demographics, lifestyles, purchasing power, buying pattern

Calculate adams utility at his optimal consumption : Calculate Adams utility at his optimal consumption bundle (You must clearly show all working and explain the economic intuition to receive the marks

Provide the team with a brief critical assessment : Provide the team with a brief critical assessment of the article, utilising the response by Shearing. Zoltan Pozsar's argument that a great power conflict

Calculate utility at the optimal consumption point : Illustrate and explain your answers on a well labelled indifference curve diagram and calculate utility at the optimal consumption point

Which state has the best relative benefits compared : Which state has the best relative benefits compared to the state's average income? Which state is the most restrictive? What is the length of time someone can

What are the four elements of the marketing mix : What are the four elements of the marketing mix? Describe each aspect in detail. Of the four elements, which is the most important? Why?

User Account

All Pages