Set up the lagrangian and find the optimal consumption

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Reference no: EM13236880

John has a weekly endowment of 140 dollars that he spends on buying games (G) and music cds (M). The price of each game is 30 dollars, the price of each cd is 20 dollars. He can buy any amount of the two goods that satisfies the budget constraint, including fractions (for example G=0.3987 and M=0.8765 is allowed as long as it is feasible). John's utility is given by: U(G,M)=G1/2+M1/2

a) Find John's Budget constraint.

b) Set up the Lagrangian and find his optimal consumption.

c) What is his new consumption if the price of games becomes 20 dollars?

Reference no: EM13236880

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