How will an individual allocate income to maximize utility

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Reference no: EM13243517

Assume an individual consumes three goods: food, clothing andautomobiles. Denote the quantities of these goods as Q1, Q2, Q3. the individual's utility functionis given by :

U(*) 5lnQ1 + 4lnQ2 +10 ln(1+Q3)The prices of the three goods are P1= 10, P2= 20, P3= 20000, and individuals total income is$60000.

Automobiles must be bought in discrete units, that isQ3 must be equal to 0,1,2.

Given these constraints, how will an individual allocate theirincome to maximize utility.

Reference no: EM13243517

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