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

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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

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