How many cases of cds and pizzas would luke consume in order

Reference no: EM13826817

Problem:

Luke likes to consumer CDs (good1) and pizzas (good 2). His preference over both goods is given by the utility function

U(x1; x2) = x₁²x₂⁴.

If Luke allocates $200 to spend on both goods and if a case of CDs costs $20 and a pizza costs $10, how many cases of CDs and pizzas would he consume in order to maximize his utility subject to his income? Show your work and illustrate your answer graphically.

Additional Information:

The problem belongs to economics in price theory deals with deriving maximum marginal utility and marginal rate of substitution.

Reference no: EM13826817

Questions Cloud

Strategies for marketing success : Strategies for Marketing Success

Explain what is meant by audit risk : You are the partner in charge of the audit of Drugs4U Ltd, a company which develops, manufactures and sells to the a trade market a wide range of drugs which promote healthy living.

Do not think that catholics are truly christians : Some Protestant Christians do not think that Catholics are truly Christians, because Catholics believe, in accordance with James 2:24: "See how a person is justified by works and not by _ alone.

What will be the firms cash cycle : Suppose that Ken-Z Art Gallery has annual sales of $894,000, cost of goods sold of $584,000, average inventories of $170,000, average accounts receivable of $139,000, and an average accounts payable balance of $64,000. Assuming that all of Ken-Z’s sa..

How many cases of cds and pizzas would luke consume in order : The problem belongs to economics in price theory deals with deriving maximum marginal utility and marginal rate of substitution.

Weighted average tax rate : TAFKAP Industries has 5 million shares of stock outstanding selling at $14 per share, and an issue of $30 million in 7.5 percent annual coupon bonds with a maturity of 15 years, selling at 103 percent of par. Assume TAFKAP’s weighted average tax rate..

Critical evaluation of cvp analysis : Write a 1500 word report on critical evaluation of CVP analysis

Different capital structures : We have explored different capital structures. It is noted that initially, leverage can be the least expensive form of capital. However, if potential lenders feel a firm is overly leveraged, they may charge a punitive rate, or refuse to lend all toge..

How would you adjust your behavior in the long term : If the price of that product or service went up by 10% overnight, how would you adjust your behavior in the short term. How would you adjust your behavior in the long term

User Account

All Pages