There were market where coupons could be bought or sold

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Reference no: EM131198517

Helen has a utility function given byU=[x^.5+y^.5 ]^2, where x is the amount of product X consumed per month and y is the amount of product Y consumed per month. The government has instituted rationing. Everyone receives 200 ration points per month. To purchase products X and Y, Helen must pay with ration coupons as well as money prices. Each unit of product X requires 2 coupons and $4. Each unit of product Y requires 4 coupons and $2. Helen has a monthly income of $200. For parts (a)-(c) assume that coupons cannot be sold for money.

Find her utility maximizing values of x and y. Illustrate your answer with a diagram.

Redo part (a) assuming that her monthly income is $280.

Redo part (a) assuming her monthly allocation of coupons is 280.

How would your answers to (b) and (c) change if there were a market where coupons could be bought or sold for $2 each?

Reference no: EM131198517

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