Optimal consumption bundle of strawberries and turnips

Assignment Help Business Economics

Reference no: EM131244609

Luke only consumes strawberries (S) and turnips (T) each week with his $36 income. The price ofstrawberries is Ps = $3/basket, while the price of turnips is Pt = $1.50/turnip. Luke’s preferences are given by the following utility function:

U(S,T) = SquareRoot(ST)

(a) Set up the Lagrangian equation for this constrained maximization problem.

(b) What are the 3 first order conditions (FOC) of optimization from the Lagrangian?

Reference no: EM131244609

Questions Cloud

Modern theories of economic growth attempt to explain : What are the broad empirical regularities associated with growth and development that modern theories of economic growth attempt to explain? Please Enumerate and describe briefly.

Briefly what happens in the short run and in the long run : When the investment rate in a country decreases permanently (as a result of discouraging fiscal policy such as an increase in investment taxes, for example), does it impact the level or the growth rate of output per worker? Explain briefly what happe..

Summarizes the net effect of the listed bank transactions : Which of the following correctly summarizes the net effect of the listed bank transactions?

First order conditions of optimization from lagrangian : Suppose Jeffrey’s utility depends on the amount of time spent watching You Tube videos (Y) and the amount of time playing video games (V), and his utility function is equal to. Set up the Lagrangian equation for this constrained maximization problem...

Optimal consumption bundle of strawberries and turnips : Luke only consumes strawberries (S) and turnips (T) each week with his $36 income. The price ofstrawberries is Ps = $3/basket, while the price of turnips is Pt = $1.50/turnip. Luke’s preferences are given by the following utility function: What are t..

About concept of specialization and comparative advantage : In the first chapter, we learned about the concept of specialization and comparative advantage. By learning these concepts, we tend to agree that specialization along lines of comparative advantage and then trade is beneficial. In your opinion, does..

Does the elimination of competition promote efficiency : Does the elimination of competition promote efficiency? Why do you think Achnacarry was a pipe-dream? please include (Opinion, Reason & Facts, Explanation, Citation)

Find the utility maximizing consumption bundle : Harry purchases butterbeer (B) and chocolate frogs (C) and has the following utility function:U(B,C) = min(4B, C). He has $360 to spend on butterbeer and chocolate frogs. Suppose that the price ofbutterbeer is $4 per bottle and the price of chocolate..

Derive the equation for the marginal rate of substitution : Jackie has the following utility function: Derive the equation for the marginal rate of substitution for this utility function. Solve for Jackie’s optimal consumption bundle.

User Account

All Pages