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Utility function for chocolate and ice cream

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Reference no: EM13841692

Problem 1: David has $50 to spend on chocolate (X) and ice cream (Y). The price of chocolate, PX, is $5, and the price of ice cream, PY, is $8. His utility function for chocolate and ice cream is given by U = 2X1/4Y1/5.

a. Use the graph below to show the utility maximizing bundle David buys. Graph the budget line with intercepts, label the utility maximizing bundle (A), and draw an appropriate indifference curve (11).

b. now calculate the quantities of chocolate (X) and ice cream (Y) that David buys.

(i) X =

(ii) Y =

619_appropriate indifference curve.jpg

Reference no: EM13841692

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