What is the new optimal bundle and the new level of utility

Reference no: EM13237082

Todd has the following utility function:

U(X,Y) = X * Y

Prices and Income are Px = 5, Py = 4 and I = $200.

a) Find Todd's optimal consumption bundle and utility level at that price level, using the Lagrangian multiplier method.

b) Assume the government decides to impose a tax of $5 per unit of x (so that the new price of good x is $10). What is the new optimal bundle and the new level of utility?

Reference no: EM13237082

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