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Determine units of the two commodities

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Reference no: EM133128904

Suppose the utility function for Tracey is given U = f (Y, X) = X0.5 Y0.5. Given that the price of commodity X is Kshs. 10 per unit and that of community Y are Kshs. 12 per unit.

A) Using Lagrangian multiplier technique determine units of the two commodities Tracey will buy given an income of Kshs. 24,000 in order to maximize her utility.

B) Compute the value of U and also the value of lambda and provide an economic interpretation for it

Reference no: EM133128904

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